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Hedge Funds Are Crazy About Apollo Investment Corp. (AINV)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Apollo Investment Corp. (NASDAQ:AINV) in this article.

Apollo Investment Corp. (NASDAQ:AINV) was in 10 hedge funds’ portfolios at the end of the third quarter of 2019. AINV investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 6 hedge funds in our database with AINV positions at the end of the previous quarter. Our calculations also showed that AINV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Managemnet

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the new hedge fund action encompassing Apollo Investment Corp. (NASDAQ:AINV).

What does smart money think about Apollo Investment Corp. (NASDAQ:AINV)?

Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from the second quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in AINV a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in Apollo Investment Corp. (NASDAQ:AINV) was held by Arrowstreet Capital, which reported holding $12.9 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $6.7 million position. Other investors bullish on the company included D E Shaw, McKinley Capital Management, and Levin Easterly Partners. In terms of the portfolio weights assigned to each position Bulldog Investors allocated the biggest weight to Apollo Investment Corp. (NASDAQ:AINV), around 0.4% of its 13F portfolio. McKinley Capital Management is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to AINV.

Consequently, some big names were breaking ground themselves. D E Shaw, managed by David E. Shaw, created the largest call position in Apollo Investment Corp. (NASDAQ:AINV). D E Shaw had $0.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.5 million position during the quarter. The following funds were also among the new AINV investors: Dmitry Balyasny’s Balyasny Asset Management and Steve Cohen’s Point72 Asset Management.

Let’s go over hedge fund activity in other stocks similar to Apollo Investment Corp. (NASDAQ:AINV). These stocks are RPT Realty (NYSE:RPT), Virtusa Corporation (NASDAQ:VRTU), Benchmark Electronics, Inc. (NYSE:BHE), and SM Energy Company (NYSE:SM). This group of stocks’ market caps match AINV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RPT 11 37172 2
VRTU 13 41660 0
BHE 13 45160 1
SM 20 103726 2
Average 14.25 56930 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $29 million in AINV’s case. SM Energy Company (NYSE:SM) is the most popular stock in this table. On the other hand RPT Realty (NYSE:RPT) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Apollo Investment Corp. (NASDAQ:AINV) is even less popular than RPT. Hedge funds dodged a bullet by taking a bearish stance towards AINV. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AINV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AINV investors were disappointed as the stock returned 4.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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