Did The Smart Money Play Apollo Global Management Inc (APO) Correctly?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Apollo Global Management Inc (NYSE:APO) and determine whether hedge funds had an edge regarding this stock.

Is Apollo Global Management Inc (NYSE:APO) going to take off soon? Money managers were buying. The number of bullish hedge fund positions rose by 10 recently. Apollo Global Management Inc (NYSE:APO) was in 47 hedge funds’ portfolios at the end of September. The all time high for this statistic is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that APO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 37 hedge funds in our database with APO holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to view the fresh hedge fund action surrounding Apollo Global Management Inc (NYSE:APO).

Tom Gayner of Markel Gayner Asset Management

Do Hedge Funds Think APO Is A Good Stock To Buy Now?

At third quarter’s end, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the second quarter of 2021. By comparison, 28 hedge funds held shares or bullish call options in APO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Tiger Global Management LLC was the largest shareholder of Apollo Global Management Inc (NYSE:APO), with a stake worth $1377.3 million reported as of the end of September. Trailing Tiger Global Management LLC was Senator Investment Group, which amassed a stake valued at $160.1 million. Brave Warrior Capital, Hawk Ridge Management, and Newbrook Capital Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Scoggin allocated the biggest weight to Apollo Global Management Inc (NYSE:APO), around 6.83% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, setting aside 6.46 percent of its 13F equity portfolio to APO.

As one would reasonably expect, key money managers have jumped into Apollo Global Management Inc (NYSE:APO) headfirst. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the most valuable position in Apollo Global Management Inc (NYSE:APO). Senator Investment Group had $160.1 million invested in the company at the end of the quarter. Glenn Greenberg’s Brave Warrior Capital also made a $154.4 million investment in the stock during the quarter. The other funds with brand new APO positions are Robert Boucai’s Newbrook Capital Advisors, Tom Gayner’s Markel Gayner Asset Management, and Malcolm Levine’s Dendur Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Apollo Global Management Inc (NYSE:APO) but similarly valued. These stocks are Shaw Communications Inc (NYSE:SJR), The Interpublic Group of Companies Inc (NYSE:IPG), monday.com Ltd. (NASDAQ:MNDY), Equity Lifestyle Properties, Inc. (NYSE:ELS), RH (NYSE:RH), Evergy, Inc. (NYSE:EVRG), and Vedanta Ltd (NYSE:VEDL). This group of stocks’ market values resemble APO’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $1202 million. That figure was $2594 million in APO’s case. RH (NYSE:RH) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 8 bullish hedge fund positions. Apollo Global Management Inc (NYSE:APO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APO is 79.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on APO as the stock returned 14.4% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.