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URL:  http://boards.fool.com/large-cap-us-one-biz-segment-diverse-30766406.aspx

Subject:  Re: Let the Game Begin! Date:  7/8/2013  2:40 PM
Author:  EightTrack3 Number:  17612 of 23859

Large-cap, US, one biz segment, diverse customers, predictable w/high barriers to entry.

What's your pick?


Apollo Global Management (APO). A bit less than $10 billion market cap; please note that APO is a publicly-traded partnership that issues K-1 to its limited partners (shareholders). Due to its production of UBTI (unrelated business taxable income) this is not a suitable investment for tax-deferred vehicles.

APO is currently trading at $23.34 per share.

What does it do?

APO is an alternative asset manager. It has three lines of business: private equity investment, credit products, and real estate. Approximately $114 billion in AUM.

What's the difference between your plain-vanilla asset manager and alternative asset managers?

At the risk of oversimplification, plain vanilla asset managers receive a set percentage on their assets under management. Alt asset managers receive a set fee (1-2%) and "carry" on certain products above a hurdle rate (for example, 20% above a 8% return).

APO management has stated that they intend to pay out "available cash flow" which is all cash flow generated after the needs of the business.

Management?

Owner-operator management that owns 60+ percent of the business. Three founding partners: Leon Black (not Leon Kass), Josh Harris, and Mark Rowan. Started in 1990; partners came from Drexel Burnham, which explains value-orientation and credit focus.

The three partners receive base salary