Investing With the Smart Money

Marc Courtenay

NEW YORK ( TheStreet) -- I have an investment bias: It's hard to win at the game of investing if the odds are stacked against you. There are many ways to keep that from happening and here's one that should be obvious.

Find a publicly traded asset management company with numerous wealthy clients and an outstanding track record.

One of these, Apollo Global Management will report its quarterly earnings on Monday. It should reveal more about how the smart money plays the hand they've been dealt and why they win more than they lose.

Apollo is the company founded by Leon Black, one of the 300 most successful billionaires in North America, who understands the business of leveraged buyouts, private equity and investment management. Black started APO back in 1990 in New York City and expanded his empire to nine other regions throughout North America, Europe and Asia. Apollo has a market cap of almost $3.5 billion.

His firm primarily provides its services to pension and endowment funds, institutional investors, individual investors, pooled investment vehicles and corporations. It manages client-focused portfolios, hedge funds, real estate funds, and private equity funds for its wide assortment of clients.

APO invests in the fixed income and alternative investment markets across the globe. Its alternative investments include investment in private equity and real estate markets. The firm's private equity investments include traditional buyouts, distressed buyouts and debt investments, corporate partner buyouts, distressed asset, turnaround, corporate restructuring, special situation, acquisition, and industry consolidation transactions. Its fixed income investments include distressed debt, senior bank loans, and value oriented fixed income securities.


It seeks to invest in companies based in North America, with a focus on the United States and Europe. The firm employs a combination of contrarian, value and distressed strategies to make its investments. It conducts an in-house research to decide upon and create its investment portfolio.

As an example of its winning deals, I pointed out in a recent article how APO had decided to heavily invest in the IPO last autumn of the resurgent Realogy . It's quite a success story for both APO and RLGY and I encourage you to read it carefully.

It helps underscore why Apollo has been so good for its customers and its shareholders. Speaking of shareholders, Marc Spilker, the president of APO and a member of its Executive Committee owns 2,757,452 shares of APO.

Insiders and beneficial owners control about 5% of the outstanding shares, and the top institutional owner of shares is FMR LLC (a.k.a. Fidelity Investments), which owns 5.5% of the outstanding shares of APO as of Dec. 31, 2012.

Chief Legal Officer and Chief Compliance Officer John Suydam sold 100,000 shares of his holding April 8-9 at an average price of $26.50. He reportedly still owns 981,039 shares as of April 9. In total, Spilker and Suydam own over 3.7 million shares.

Multiply 3.7 million by the closing price on May 2 of $26.25 and you have to be impressed by these insiders commitment to the future of this firm.


As of the last quarter of 2012, Apollo's investment team has been knocking the ball out of the park. APO's trailing 12-month return on equity came in at 73%.

If that isn't breathtaking enough, its year-over-year quarterly revenue growth was 81% and its quarterly earnings per share showed a staggering 1,469% year-over-year growth. Just take a look at this one-year chart to get the overview of this amazingly successful firm. APO EPS Diluted TTM data by YCharts

The share price moved in lockstep with revenue per share and EPS magnificence. Part of its ongoing stellar success has to do with its "strategic alliances," such as the one announced Thursday with Apex Energy, a privately held oil and gas company.

Both companies said they formed a strategic partnership to invest in oil and gas properties in the Appalachian Basin, with a primary focus on the Marcellus Shale. Greg Beard, Global Head of Natural Resources and Senior Partner at Apollo, said, "We are excited to partner with a management team of Apex's caliber, and believe this investment will further our strategy of backing talented, experienced teams to acquire and derive value from physical assets."

Geoffrey Strong, also of Apollo, further commented, "We believe that the long-term prospects for the Appalachian Basin, and the Marcellus Shale in particular, are compelling, and we look forward to working with Mark Rothenberg and Ed Long as they build Apex's business."

Here's another example of how the "Smart Money" invests. By acquiring shares of APO you get a piece of all the pies APO has its fingers in.

As it steps into the earnings confessional before the markets open on Monday, emember how APO describes itself in its press releases.

"Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Mumbai and Hong Kong. Apollo had assets under management of approximately $113 billion as of December 31, 2012 in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources."

For more information about Apollo, see its informative Web site. You can learn more about how great investors invest and how APO plans to grow in the months and quarters ahead.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.