MARKET INSIGHT: Apollo Investment Offering Both Growth and Income
February 22, 2007
Apollo Investment Corporation (AINV) invests in middle-market companies and thinly traded public companies. The companies that are invested in operate in sectors like automobile, building materials, business services, chemicals communications, consumer products, energy, environmental services, financial services, healthcare, homebuilding, printing, transportation and printing and publishing. The company operates as a closed-end, non-diversified management investment company in the United States.
Apollo Investment’s capital gains are expected to be above the industry average in the future quarters. Analysts say that the company has significant expertise in the private equity industry and that it is anticipated to experience substantial market growth over the next few quarters. The company has consistently posted stellar sales growth and earnings growth numbers.
In addition, this stock looks very attractive due to the much higher dividend that is paid out compared to the other hybrid financial companies. Apollo’s strong financial performance supports the ability to pay out an 8.41 percent yield on the dividend. The company is experiencing tremendous growth on both the top and bottom lines. In the current market environment, where demand for private capital is at a premium, profit margins for companies such as Apollo are coming in as high as 65 percent.
The latest operating results for Apollo showed net investment income of $38 million and a net investment income per share of $0.46 per share. Net assets totaled $1.35 billion and net asset value per share came in at $16.36. For this last reporting period Apollo invested in 6 new portfolio companies.
The stock has been in a strong uptrend as of late, as shown in Figure 1, below. Though this stock is an income stock, there is room for further growth as well. In addition, the company has options allowing the options strategist to generate even more income from this equity by writing covered calls. Apollo currently has options that extend out to September of 2008 providing ample time for the trader to sell slightly out-of-the-money calls and still capture significant premium to go along with the high dividend yield—an income double dip, if you will.
Figure 1: 200- and 50-day Moving Average Chart for Apollo Investment
Happy Trading.
Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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