This column originally appeared exclusively first for Stock Investor Cheat Sheet premium subscribers on February 25th and has been updated to reflect current data changes.
With shares of Apollo Investment Corporation (NASDAQ:AINV) trading at around $8.68, is AINV an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Apollo Investment is a closed-end management investment company with a middle-market focus. The company is involved in over two dozen industries, but business services and healthcare represent the two biggest sectors. This is good news, considering both sectors have performed well as of late. Another big plus is that Apollo Investment has exposure to both fixed and floating rate loans, which means increased protection against rate changes. At the current time, 48 percent of the portfolio is in subordinated debts. Therefore, there is some risk here. On the other hand, 40 percent of the portfolio is in secured loans. 12 percent of the portfolio is in common equity, warrants, CLOs and preferred equity.
Apollo Investment is a Business Development Company. That being the case, the company receives special tax breaks. As you might have guessed, the dividend yield is very impressive. Apollo Investment currently yields 9.40 percent. While the dividend has been reduced recently, it’s still well above the industry average.
One negative that is commonly pointed out by shorts or longs of competing companies, is the decline in NAV for Apollo Investment over the past year. This fact can’t be argued. However, Apollo Investment is one of the few companies in the industry that has seen consistent insider buying. Therefore, those who know the most about the business are confident about future prospects. Now let’s take a look at some important numbers prior to forming an opinion on the stock…