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Apollo Global's Contrarian Value Approach

09/01/2017 2:56 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

I also have a new recommendation for you: Apollo Global Management (APO), a leading private equity firm founded 26 years ago by Drexel Burnham executive Leon Black, explains growth and income expert Mark Skousen, editor of High-Income Alert.

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Based in New York City -- but with offices from Los Angeles to Frankfurt to Hong Kong -- it uses a contrarian, value-oriented approach and specializes in leveraged buyout transactions and distressed securities.

Among the notable businesses currently owned by Apollo through its various funds are Caesars, Claire’s, Norwegian Cruise Line, Coldwell Banker, Century 21, Hardee’s, Carl’s Jr. Restaurants and CORE Media Group.

It currently manages more than $160 billion across various investment vehicles. As the values of those assets rise, so do management fees, performance bonuses, profit and operating margins and net income. Better still, the stock is both inexpensive and high yielding.

The consensus -- which I believe is too low -- is that Apollo will earn $2.46 a share this year. (I think the real number will be closer to $2.75.) That means the stock is selling for about 11 times prospective earnings.

And those earnings will rise to more than $3 a share next year. That means the dividend yield -- already attractive at 7% -- is likely to grow in the months ahead.

There is always some risk when you buy an asset management company. (After all, if the market tanks, the value of those assets will decline.)

But by using our customary trailing stop, we have limited downside risk with considerable upside potential. So pick up Apollo Global Management at market and place a protective stop at $24.

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