Kris Tuttle

Four Blemishes and a Complication in Apollo's Future

I don't have a strong insight on entry points and am not a technical analyst. Obviously I'd short on strength whenever possible. As for price targets I'm not expecting this company to go to zero although it's not impossible. Since over 1/2 their business is from special government loan programs one can't be certain. The company does have substantial assets and cash so that's a very good cushion against bankruptcy,

My best guess right now is that if government regulations and student loan programs get more regulated and rationalized then growth at Apollo (along with profitability) will be much lower. As a side note the $95 price target at Credit Suisse was based on a DCF model with margins going from 27% up to 37%!

Anyway lower revenue growth and profitability will drive a lower multiple as well so we could certainly see share prices in the $40's without a huge shift down in fundamentals.

Four Blemishes and a Complication in Apollo's Future

We actually earned quite a bit from our short position in Apollo and continue to enjoy returns from a smaller one as the stock declines further.

There's no malice intended here. We've spent time and effort to evaluate a situation and felt that we had enough conviction to share the analysis with others and even take a position of our own.

More broadly we have always found that taking a position, long or short, based on your research sharpens your thinking and also helps you understand how investors experience and view your work.

We're actually not "short sellers" although we do sometimes short stocks. Most of our portfolio tends to be on the long side. However over the years we felt that this was like using only one arm instead of two and our returns could be enhanced by having short positions. It has in fact worked out that way and also serves to buffer us from market gyrations which we have no visibility on.

Hope that helps provide some context for our work and postings.

New Information Raises Red Flags for Apollo

We certainly don't mean to either endorse or cast aspersions on Citron as a firm. They are however an information source in the market and have helped to set the stage for this stock in the market now.

Since we posted this we've discovered a number of very smart sources on this name that provide more insight on both sides of the story.

Apollo remains a name to watch closely and one that provides some good opportunity for swing trades at these levels.