Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether Apollo Global Management , Inc. (NYSE:APO) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Apollo Global Management , Inc. (NYSE:APO) has experienced an increase in hedge fund sentiment recently. APO was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 24 hedge funds in our database with APO positions at the end of the previous quarter. Our calculations also showed that APO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the recent hedge fund action regarding Apollo Global Management , Inc.(NYSE:APO).
Hedge fund activity in Apollo Global Management , Inc. (NYSE:APO)
Heading into the first quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in APO a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Tiger Global Management LLC, managed by Chase Coleman, holds the most valuable position in Apollo Global Management , Inc. (NYSE:APO). Tiger Global Management LLC has a $1.7969 billion position in the stock, comprising 9.9% of its 13F portfolio. The second most bullish fund manager is Samlyn Capital, led by Robert Pohly, holding a $95 million position; the fund has 2% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise James Parsons’s Junto Capital Management, Tom Gayner’s Markel Gayner Asset Management and Robert Joseph Caruso’s Select Equity Group. In terms of the portfolio weights assigned to each position Tiger Global Management LLC allocated the biggest weight to Apollo Global Management , Inc. (NYSE:APO), around 9.92% of its 13F portfolio. Concourse Capital Management is also relatively very bullish on the stock, setting aside 5.14 percent of its 13F equity portfolio to APO.
Now, specific money managers were breaking ground themselves. Junto Capital Management, managed by James Parsons, assembled the most outsized position in Apollo Global Management , Inc. (NYSE:APO). Junto Capital Management had $52.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $11.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Pasco Alfaro / Richard Tumure’s Miura Global Management, Michael Gelband’s ExodusPoint Capital, and Tim David’s Guardian Point Capital.
Let’s check out hedge fund activity in other stocks similar to Apollo Global Management , Inc. (NYSE:APO). These stocks are New Oriental Education & Tech Group Inc. (NYSE:EDU), Tencent Music Entertainment Group (NYSE:TME), Fortis Inc. (NYSE:FTS), and Vulcan Materials Company (NYSE:VMC). All of these stocks’ market caps resemble APO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $1073 million. That figure was $2225 million in APO’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 14 bullish hedge fund positions. Apollo Global Management , Inc. (NYSE:APO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately APO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); APO investors were disappointed as the stock returned -33.5% during the same time period 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.