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Apollo's Verdict Is In, Analysts Seem To Have Missed It

Patient Tech Investor profile picture
Patient Tech Investor


  • In the very worst case, the risk of a dividend cut for Apollo seems remote.
  • We lowered our earnings potential range from $0.60-$0.70 to $0.50-$0.65.
  • When the dust settles on the market, Apollo might be a good buy.

We discuss our reasoning for why the sharp stock price drop of Apollo Investment Corporation (AINV) is creating a more profitable buying opportunity. When markets fail to understand a company's vision and progress, it usually creates bargains especially during sharp market corrections.

The Analysts' Misunderstandings

A particular question and answer sequence during Apollo's last conference illustrates both analysts and market misconception regarding Apollo's vision and progress. It begins with Casey Alexander of Compass Point, "Looking at where LIBOR is going forward, even with the expansion as a balance sheet, it seems to me that you guys, you really need everything to go right to cover the dividend and comfortably cover the dividend... ?"

Greg Hunt of Apollo answered, "I think no. Your adjusted number is probably a little bit low... but call it in the $0.43 to $0.45 range. Our average leverage for the quarter was lower than where we're at right now. So that drives another $0.03 or so cents to our NII... I wouldn't say we're just creaking over it... We also feel like though, fully employed at this level -- right now LIBOR has almost hit the worst possible point for us because it goes down much more, our floors kick in, it goes up, we make more money."

A second sequence further clouded matters. The conversation begins with Rick Shane of JP Morgan, "I think they're two divergent trends here... you guys have done a good job moving in the right direction there and taking advantage of the higher leverage at the same time NAV continues to decline. How do you reconcile those two trends?"

Tanner Powell, Apollo's President & CIO, answered, "[O]n average that portfolio [non-core] is 5.6%. [O]ur focus is sort of twofold is maximizing the return on those assets in order to ensure that NAV, doesn't decline all that much, but at the

This article was written by

Patient Tech Investor profile picture
I have been an investor for several decades enduring the 87 crash, 2000 crash, and 08 crash. I do use trading systems developed with TradeStation. I have enjoyed the rewards from both buy and hold and trading. My professional experiences includes several decades as a process control engineer. I hold a JD from an eastern law school.

Analyst’s Disclosure: I am/we are long AINV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (8)

Patient Tech Investor profile picture
For anyone who missed this:

It's important and it is positive.

EdThompson profile picture
Given the 30% drop since this article was published, what do you think now?
Patient Tech Investor profile picture
It is our belief this is a huge over kill. The concern still remains at how much business damage has been done in the process of getting through this. It isn't about the oil assets. There isn't enough left and they aren't paying. My guess is that the company has been buying stock with both hands. Could be wrong. It has a 15% exposure to airplane leasing. So how long until they start really flying again? Once it is over you will see a huge influx of passengers.

Thanks for a great article , long AINV !
kesslerblvd profile picture
Had a reverse split which is likely why the price is what it is.
Patient Tech Investor profile picture
It did but that isn’t the issue here.

This one is a little hard to understand in my humble opinion. ThT is why I write these articles.

kesslerblvd: Stock splits don't change the value of the company.
It just seems like this a golden opportunity to buy to add on to an existing account. Wouldn't you agree especially if they continue to pay the dividend and ultimately return to it's 52 week high.
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