Editor’s Note: Paying attention to what Private Equity funds are doing at any given point in time is a sure way to supercharge your returns. It’s where you’ll find valuable insights into what assets and sectors may be underpriced and set for substantial long-term returns.
This is Part II of the series, “Where The Most Successful Funds are Investing” – my latest research on where Wall Street’s elite are deploying their capital. To check out Part I, covering PE giant Blackstone (BX), simply click here.
Apollo Global Management (APO) reported earnings on Tuesday, May 4th, and had a follow-up conference call with analysts and investors where CEO, Marc Rowan, talked about where Apollo is focusing its efforts right now…
Much like Blackstone (discussed in Part I of this series), spending a little extra effort on what this Private Equity giant is doing with their capital right now is well worth it.
Our goal? To narrow down our focus… and to piggyback Wall Street’s elite in finding areas of the market poised for substantial gains in today’s value-lacked market.
But first, let’s step back and see what this company has to offer…
Apollo is focusing on three major investment approaches right now.
- They remain involved in Private Equity, where their funds have owned more than 150 companies and had average gross internal rates of return of 39% – one of the best track records in the business over the past three decades.
- They are huge investors in credit and have been for years. Apollo does an enormous amount of business with retirement income-oriented insurance companies, and finding a way to earn higher yields in a low-interest rate world is critically important.
- And more recently, Apollo has focused on building up a collection of permanent capital assets. They have bought insurance companies that generate consistent returns and help support the bottom lines of the various investment plans and retirement income products they sell. These insurance operations are bringing in new money for Apollo to manage every day.
One of Apollo’s biggest deals this quarter was it’s agreement to purchase the rest of Athene Holdings, a retirement-focused insurance company, that they did not already own. That puts Apollo in control of permanent capital, a lot of which need high rates of income from the credit investments programs Apollo can offer.
It is sort of the best of both worlds of Private Equity and credit investing.
I’ll pull the cat out of the bag on this one…
Members to the Investment Advisory are well aware of Apollo and all that they do as a company. This is because Apollo Global Management (APO) was one of two stocks recommended in last month’s issue.
The only problem was that my timing was a bit off the mark. The stock price ran up above our buy-under price just before my monthly issue was published, forcing us to wait for another entry point.
When the market does correct itself, I will be buying shares of APO on the down and will probably celebrate once I do. Given Apollo’s success over the years, it is a quintessential value pick while everyone else is running for the exits.
Fortunately for us, despite members just missing APO on it’s recent floor, we have a tendency to find just as much success by loading up on their other initiatives.
One of the most significant investments Apollo made in the first quarter of 2021, was a tender offer (a type of public takeover bid) for the shares of craft store Michaels (MIK), that they did not already own. The deal valued the chain of stores at $3.3 billion.
Apollo should be able to use its long history of owning retail companies to keep Michaels running until we get deeper into the reopening and the business can be sold for a considerable profit.
Apollo was also recently a buyer of Verizon Media for $5 billion.
Verizon Media consists of Yahoo and all of the old AOL assets. Verizon Media also owns some ad technology and media platform businesses.
David Sambur, Senior Partner and Co-Head of Private Equity at Apollo talked about this deal, telling us:
“We are big believers in the growth prospects of Yahoo and the macro tailwinds driving growth in digital media, advertising technology, and consumer internet platforms to help Yahoo continue to thrive. Apollo has a long track record of investing in technology and media companies, and we look forward to drawing on that experience to help Yahoo continue to thrive.”
Apollo’s Bet On The “Reopening”
Apollo is also betting on a strong return of business conventions once this pandemic subsides, a belief reflected in its recent deal with Las Vegas Sands (LVS).
Apollo will be buying Las Vegas Sands’ operations for $2.25 billion while Vici Properties (VICI) is purchasing the real estate for the Venetian, Palazzo and the Sands Expo and Convention Center for $4 billion.
It is worth noting that Apollo already owns more than $120 million of Vici Properties, so it is quite the double-dip.
Apollo already has about $50 billion of real estate investments as well as significant positions in REITs.
Co-President Scott Kleinman reminded us of what has made Apollo so good over the years by saying:
“We continue to believe that purchase price matters.”
So do I.
Apollo has made big bets on the recovery of the US economy, and they have been doing so since the early days of the pandemic.
If we look at recent deals, it is clear they still like the casino business and expect Vegas to get back to some sort of normal before too much time goes by. Casino operators and REITs may give us a chance to follow Apollo’s lead if we can get them at the right price.
The search for yield is becoming more difficult every day. But we can turn towards REITs, Business Development Companies (BDCs), and even credit closed-end funds offered by Apollo and other Private Equity firms to provide that yield.
Apollo’s value approach has made them one of my favorite Private Equity firms from which to pilfer ideas over the years. My readers and I have made a lot of money cloning Apollo’s investment portfolio.
Internet content and data. Credit opportunities. Casinos. Conference Space. Real Estate. Consumer Brands… This is what Apollo likes right now.
Perhaps we should investigate these further.