Apollo Global Management, LLC (APO): 2019 Top Picks' Mid-Year Update

07/12/2019 5:00 am EST


Crista Huff

Editor, Cabot Undervalued Stocks Advisor

Crista Huff, editor of Cabot Undervalued Stocks Advisor, selected Apollo Global Management, LLC (APO) as her favorite investment idea for 2019. The stock rose 40% in the first half of the year. Here's her latest update on the private equity and alternative investing firm.

Apollo Global is an alternative investment company with assets under management (AUM) totaling $280 billion, dispersed among credit, private equity and real estate investments. On May 2, Apollo announced that they will convert from a publicly traded partnership to a corporation during the third quarter of 2019.

Several of Apollo’s alternative asset manager peers announced corporate conversions during the last year, compelling Apollo to hop onto the bandwagon in order to garner a share of the institutional money that will more easily flow to these new corporate entities.

Many institutional investors (pension funds, mutual funds, etc.) who are prohibited from investing in shares of partnerships, as per their investment policy statements and prospectuses, will embrace the opportunity to own APO after the corporate conversion.

The stock will also be eligible for inclusion in various stock market indexes, thus generating buying activity on the part of index-oriented investment entities (e.g. mutual funds and institutional portfolios). The negative trade-off for Apollo is that the company will likely pay a higher income tax rate in the future. 

At a share price of 35.28, APO has delivered a 52% year-to-date total return to shareholders. It’s not realistic to expect additional capital gains after such outsized performance during the first half of 2019.

The payout varies each quarter with the total of the last four announced payouts equaling $1.91 and yielding 5.4%. Consider using a stop-loss order to protect profits, and watch for opportunities to buy APO during market corrections.

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