3. Athene Holding Ltd. (NYSE: ATH)
P/E Ratio as of June 14: 3.61
Number of Hedge Fund Holders:44
Ranking 3rd in our list of 10 best undervalued stocks to buy now is retirement services company Athene Holding Ltd. (NYSE:ATH). The company offers various services such as fixed annuities and funding agreements. In 2016, the firm began trading on the New York Stock Exchange (NYSE) and raised $1.1 billion, making it the second-largest US-listed firm to launch that year.
Athene Holding Ltd. (NYSE:ATH) posted its net invested assets of $155.7 billion in the first quarter of 2021, a 28.5% increase year-over-year. ATH shares currently trade for $63.01 and have a P/E ratio of 3.61. The 52-week price range of Athene Holding Ltd. (NYSE:ATH) is $29.00-63.64. Shares of ATH jumped 103% over the last twelve months. On May 19, Morgan Stanley maintained an Overweight rating on Athene Holding and raised the price target to $60.
There were 44 hedge funds that reported owning stakes in Athene Holding Ltd. (NYSE:ATH) at the end of the first quarter, up from 36 funds a quarter earlier. The total value of these stakes at the end of Q1 is $1.34 billion
Lakewood Capital Management mentioned Athene Holding Ltd. (NYSE:ATH) in its Q2 2020 investor letter:
“We previously discussed our long position in Athene Holding in our third quarter 2019 letter, and the stock performed well over the next several months as management continued to execute on its competitively advantaged strategy in retirement services. However, Athene’s stock was punished by the pandemic-related sell-off, and at 60% of tangible book value, we believe it has the potential to double over the next 18 months.
While investors are justifiably concerned about future credit impairments, we think they are unlikely to amount to more than 10% of its tangible book value of $10 billion. Given that Athene typically generates pre-tax profits of nearly $1.5 billion, the company should still grow tangible book value in 2020. Athene has also capitalized on the significant disruption in the marketplace to improve its competitive position and increase its return profile. In June, the company, along with its co-investment vehicle ACRA, announced an accretive transaction with Prudential’s Jackson business, whereby it would reinsure $27 billion of fixed annuity and fixed indexed annuity reserves and acquire an 11% stake in Jackson’s remaining business. This deal will increase Athene’s earnings by nearly 10% and add 100bps to overall returns on equity by 2022. We estimate that Athene is paying just 3x pro forma earnings for this business, underscoring its unique ability to acquire complex assets at incredibly attractive prices. Furthermore, Athene continues to have significant dry powder to do additional deals, comprised of over $3 billion of excess equity capital on its balance sheet and nearly $2 billion of excess third-party capital in ACRA.
We are also encouraged to see KKR (a previous Lakewood long) recently announce that it is acquiring Global Atlantic, an Athene competitor (that is more levered but generates similar returns on equity) for 1x tangible book value. Applying the same valuation to our estimate of Athene’s book value at the end of 2021 yields nearly 100% upside in the shares over the next 18 months. At that level, the shares would be trading at just 6x forward earnings.”
