Hedge Funds Are Selling Apollo Investment Corp. (AINV)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Apollo Investment Corp. (NASDAQ:AINV) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Apollo Investment Corp. (NASDAQ:AINV) was in 5 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 20. AINV has seen a decrease in hedge fund sentiment of late. There were 9 hedge funds in our database with AINV holdings at the end of June. 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 for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a gander at the fresh hedge fund action encompassing Apollo Investment Corp. (NASDAQ:AINV).

What have hedge funds been doing with Apollo Investment Corp. (NASDAQ:AINV)?

At third quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -44% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AINV over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AINV A Good Stock To Buy?

The largest stake in Apollo Investment Corp. (NASDAQ:AINV) was held by Arrowstreet Capital, which reported holding $15.9 million worth of stock at the end of September. It was followed by Winton Capital Management with a $2.1 million position. Other investors bullish on the company included Two Sigma Advisors, McKinley Capital Management, and ExodusPoint Capital. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to Apollo Investment Corp. (NASDAQ:AINV), around 0.09% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to AINV.

Since Apollo Investment Corp. (NASDAQ:AINV) has experienced falling interest from the smart money, it’s safe to say that there is a sect of funds who sold off their positions entirely in the third quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $0.8 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its stock, about $0.3 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Apollo Investment Corp. (NASDAQ:AINV) but similarly valued. We will take a look at ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), Ellington Financial Inc. (NYSE:EFC), SIGA Technologies Inc. (NASDAQ:SIGA), Turning Point Brands, Inc. (NYSE:TPB), BlackRock Resources & Commodities Strategy Trust (NYSE:BCX), Patterson-UTI Energy, Inc. (NASDAQ:PTEN), and Brainstorm Cell Therapeutics Inc. (NASDAQ:BCLI). This group of stocks’ market caps are closest to AINV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZIOP 13 102366 2
EFC 11 37613 3
SIGA 16 52498 5
TPB 24 98061 12
BCX 6 2745 1
PTEN 22 83691 -4
BCLI 3 2213 -3
Average 13.6 54170 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $22 million in AINV’s case. Turning Point Brands, Inc. (NYSE:TPB) is the most popular stock in this table. On the other hand Brainstorm Cell Therapeutics Inc. (NASDAQ:BCLI) is the least popular one with only 3 bullish hedge fund positions. Apollo Investment Corp. (NASDAQ:AINV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AINV is 13.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on AINV as the stock returned 34.3% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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