All industries are dominated by the biggest and most
successful companies. In technology, there is
Google (Nasdaq: GOOG)
Amazon.com (Nasdaq: AMZN)
. In energy, companies such as
Conoco Phillips (
But every once in a while, a new guy comes along and shakes
things up. And that's what's happening in the private-equity
space right now. Since the 1980s, this industry has been
dominated by stalwarts such as the
Blackstone Group (
Kohlberg Kravis Roberts & Co. (
. But the newest player in the private-equity scene is burning up
the charts and putting its competition to shame.
In fact, the company'sinvestments have been so
successful,shares have been surging higher -- up 110% in just the
past 12 months. Take a look at the chart below.
Thestock I am talking about is
Apollo Global Management (
, a private-equity andinvestment consulting firm that was founded
in 1990 but went public only two years ago. Led by billionaire
private-equity mogul LeonBlack , the company hasput together an
impressive string of investments that have produced big
In early April, the company said it stands to make a fivefold
return on its investment in Puerto Rico-based payment processor
Evertec, with aninitial public offering (IPO) scheduled for
mid-April. Apollo purchased 51% of Evertec in 2010 for $184
million; that investment is now valued at $700 million, which
doesn't include another $160 million Apollo has received in
Apollo has seen incredible returns on other investments as
well, with its
NCL Corp. (Nasdaq: NCLH)
IPO up more than 60% and
Realogy Holdings Corp. (Nasdaq: RLGY)
IPO up more than 40%.
The firm's current private-equity pool, Apollo InvestmentFund
VII, was producing a net 26% internal rate of return at the end
of 2012 after capitalizing on distressed opportunities created
from the 2008 financial crisis, according to Bloomberg. Apollo's
$10.1 billion Fund VI, invested during the 2006-08 surge inbuyout
transactions, carried a 9% return rate.
Those amazing returns have already had a big effect on
Apollo'sbottom line , but looking forward, its stellar track
record is fueling hugegains in assets under management, up 51%
lastyear . More assets under managementwill enable Apollo to
pursue more deals, addleverage and increase management and
performance fees. Those are all keyrevenue andprofit drivers for
private-equity andinvestment management companies.
Apollo's incredible string of high returns has also led to an
eye-popping stream of income for shareholders. In the past year,
the company has returned a total of $6.5 billion in dividends to
investors.Analysts are projecting a full-year distribution of $2
in 2013, which would translate into adividend yield of 7.8%.
That's more than four times the 10-yearTreasury note 'syield of
Despite all the good news, an outsize dividend yield and
past-year gains, Apollo still looksundervalued . The company's
forward price-to-earnings (P/E ) ratio of 8 is a sharp discount
to its peer average of 13. That looks even better compared with
the S&P 500's 14.
Risks to Consider:
Apollo had a banner year last year with a number of big-money
projects and investments that exceeded expectations.
Althoughearnings , valuation and yield look good, that strong
performance could be difficult to replicate.
Action to Take -->
Apollo is the new player on the block in the private-equity space
aftergoing public just two years ago. The company's impressive
string of returns has enabled it to grow earnings andsupport an
outsize dividend yield, lifting shares to new heights.
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