The Smart Money Says to Buy Apollo Group

One of the great maxims of traders and Wall Street pros is to follow the "smart money."

I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the so-called smart money is betting. Your wish is my command.

Herewith is the first in a series of pieces looking at institutional ownership trends. First up, Motley Fool Inside Value pick Apollo Group (Nasdaq: APOL  ) . Are institutions bullish or bearish when it comes to this for-profit educator?

Foolish facts

Metric

Apollo Group

Motley Fool CAPS stars (out of 5) **
Total ratings 978
Percent bulls 86.4%
Percent bears 13.6%
Bullish pitches 137 out of 152
Highest-rated peers ITT Education Services (NYSE: ESI  ) , DeVry (NYSE: DV  ) , Career Education (Nasdaq: CECO  )

Data current as of Oct. 20.

Although the collective rating of Apollo in CAPS is decidedly bearish, those who've rated the stock more recently see the stock as a screaming value. Bulls say a recent sell-off related to new regulations was undeserved.

"Without a doubt, there are some scumbags operating in the industry, but I think they will be hounded out. Remember, waste removal used to be a mob-controlled business before [Waste Management] consolidated the industry. [Apollo Group] is the best of breed in for-profit companies ... This could be a classic Sir John Templeton 'invest at the point of maximum pessimism' entry point," wrote All-Star investor WPThatcher in August, when the stock was still priced at more than $40 per share.

Institutional ownership history

Top Owners

Latest*

2009*

2008*

2007*

BlackRock 8,642,274 8,867,184 2,196,235 2,836,523
Maverick Capital 7,483,993 5,184,649 1,590,305 0
Capital Research and Management 7,350,000 5,000,000 0 1,400,000
Tiger Global Management 6,532,000 5,184,500 0 0
Putnam LLC 5,595,007 5,778,578 979,450 1,552,562
TOP 25 TOTAL 73,052,285 73,052,285 33,362,076 36,415,643

Source: Capital IQ, a division of Standard & Poor's.

*Indicates the number of shares owned.

Institutions jumped back into Apollo in a big way when signs surfaced that the Great Recession wouldn't utterly destroy the company. They've yet to be rewarded despite a crazy-cheap valuation; shares of Apollo are down more than 36% over the past two years.

Bears will tell you the stock is cheap for a reason, and they have a point. Last week, the stock fell 25% after the company warned that enrollments would decline as a result of regulatory uncertainty.

Competitor and peer checkup

Company

Institutional Ownership

Insider Ownership

Apollo Group 72.37% 14.52%
Capella Education 99.69% 8.43%
Career Education 96.95% 1.02%
Corinthian Colleges (Nasdaq: COCO  ) 100.06% 0.47%
DeVry 79.26% 10.04%
ITT Educational Services 121.44% 0.34%
K12 (NYSE: LRN  ) 76.91% 4.59%
Strayer Education (Nasdaq: STRA  ) 114.80% 2.95%

Source: Capital IQ. Data current as of Oct. 13.

Looking at this table tells us two things. First, executives of Apollo Group have more to lose (and gain) from outstanding performance than their industry peers. Second, even though institutions have doubled down on Apollo, they still have buying room. I expect they'll take advantage.

Now it's your turn to weigh in. Do you think the so-called smart money is right about Apollo Group? Let the debate begin in the comments box below. You can also recommended other stocks for Tim by sending him an email, or replying to him on Twitter.

For further Foolishness featuring Apollo Group:

Interested in more info on Apollo Group? Add it to your watchlist by clicking here.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

K12 is a Motley Fool Rule Breakers recommendation. Apollo Group and BlackRock are Motley Fool Inside Value picks. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is smarter than the average bear.


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