Buy Alert: Athene Holding (ATH)

By Jim Pearce • August 15, 2017

TRADE INSTRUCTIONS
Date: August 15, 2017
Name: Athene Holding Ltd.
Symbol: ATH (NYSE)
Type: Open
Limit: Buy below $54

TRADE TARGETS
Holding Period: 3 months
Target Return: 10.4%
Annualized Return: 41.6%
Target Price: $59
Stop Loss Level: $48

COMPANY DESCRIPTION
Athene Holding Ltd., a retirement services company, issues, reinsures, and acquires retirement savings products designed for individuals and institutions seeking to fund retirement needs in the United States, the District of Columbia, and Germany. It offers fixed deferred, immediate, and payout annuities; funding agreements to institutional investors; and life insurance and unit-linked products. The company was incorporated in 2008 and is based in Pembroke, Bermuda. Link to company website.

TRADE RATIONALE
Peter Lynch is rightfully remembered for being one of the all-time great growth fund managers. However, what is less known is that many of the stocks that brought him that fame were in fairly mundane industries such as insurance and annuities, which is where our Rapid Profits Matrix found Athene Holding after it released a better than expected earnings report last week.

The fixed annuity business is essentially an interest rate arbitrage where scale is paramount since profit margins are narrow and being able to buy bonds in large (and therefore more highly discounted) quantities is the biggest driver of profit margins. According to a recent company presentation, Athene has been able to increase the “net investment earned rate” on its bond portfolio to 4.85% while its “cost of crediting” has been reduced to 1.89% for a gross investment margin of 2.96%, one of the highest spreads in the industry.

ATH is close to breaking out above the $54 level, first achieved four months ago after the company’s IPO last December. The market is still trying to figure out a fair valuation for ATH and with a PEG ratio of only 0.20, it appears the stock has a lot more room to the upside. Financial stocks are coming back into vogue now that it appears the Fed may not be raising interest rates as fast as first believed, and ATH is a relatively new name that should start getting a lot of attention.

NOTE: This stock is optionable, but trades on very thin volume so use limits when placing options orders.

Stock Talk

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Rick

08/15/17 ‐ 11:47am ET August 15, 2017 at 11:47am ET

Bought the Nov 2017 $55 Calls for $1.60.

Dramatic License

08/16/17 ‐ 10:29am ET August 16, 2017 at 10:29am ET

Ditto. 🙂

Kurt D

08/17/17 ‐ 11:09pm ET August 17, 2017 at 11:09pm ET

Put credit spread ATH
BTO Nov 50 put
STO nov 55 put
2.16 Net credit

Rick

08/18/17 ‐ 9:45am ET August 18, 2017 at 9:45am ET

Nice trade.

Jim Pearce

11/02/17 ‐ 4:43pm ET November 2, 2017 at 4:43pm ET

I realize ATH closed beneath my stop loss limit today, but the trading in it was so unusual that I want to be sure that it was not a mistake. The company is due to release quarterly results after the close this Monday so it could be as simple as someone shorting the stock in advance of that announcement. Of course, that might be insider trading since those results have not yet been released to the public, or just could be someone taking a huge gamble. Either, I want to see if anything clarification is provided tomorrow before issuing an alert.

Jim Pearce

11/03/17 ‐ 8:47am ET November 3, 2017 at 8:47am ET

Okay, we have some clarity on why ATH plunged yesterday: https://www.bloomberg.com/news/articles/2017-11-02/buyout-firm-stocks-plunge-as-apollo-tax-edge-in-bermuda-at-risk. My guess is the tax bill will undergo several revisions before/if/when being passed into law later this year, by which time section 4303 will either be softened or removed altogether. There are only 12 days left in the target holding period so I’m hanging onto it for now, will reassess on Monday after traders have a chance to look through the proposed tax bill over the weekend.

Maria R

11/03/17 ‐ 2:34pm ET November 3, 2017 at 2:34pm ET

Thanks for the update. Good thing I do not have a stop loss. 🙂
BTW, this is out of topic: since you are one of the iobg guys at investing daily: what happened to Igor? I had always been afraid to ask.

Bill H

11/03/17 ‐ 11:25pm ET November 3, 2017 at 11:25pm ET

Unfortunately, after the jump above $52 on Wed, I DID put on the Stop/Loss about 2:30.
Next day, just around 2:30, OOPS!

Jim Pearce

11/06/17 ‐ 9:56am ET November 6, 2017 at 9:56am ET

Hi Maria. Igor’s departure was strictly a business decision, that’s all there is to it. Earlier this year we acquired several publications that expanded our analyst capacity beyond our editorial demands, and merged the two energy publications that Igor was handling for us into a couple of the publications we acquired so we had to restructure our editorial staff to match up with our services.

Maria R

11/06/17 ‐ 10:31am ET November 6, 2017 at 10:31am ET

Thank you for your reply. Will miss Igor. He had several good recommendations

RockS

11/05/17 ‐ 3:23pm ET November 5, 2017 at 3:23pm ET

Thanks for birddogging ATH Jim. I bet Maria and I don’t have stop losses on our picks because Igor Greenwald said they were more trouble than they were worth…and we agreed with him! Would like to know where he’s gone too, since I relied heavily on his excellent appraisals and well written articles. Also will Igor’s articles continue to be available in the Breakthrough Tech archives?

Cheers,
RockS

Jim Pearce

11/06/17 ‐ 9:42am ET November 6, 2017 at 9:42am ET

Hi Rock. Igor is no longer with us, but his articles will remain in the BTP archives for you to access. I would agree that stop-loss orders can be extra work and in some cases don’t add value, but I suspect they will become increasingly valuable if/when we see a protracted stock market correction. In the meantime, they are provided as a service for those who wish to limit risk, but of course you are also free to ignore them as you like. Thank you.

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