Laughing Water Capital, an investment management company, released its fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, investment in Class A shares of the fund returned 4.0%, net of all fees and expenses, compared to 7.6% and 6.2% returns for the SP500TR and R2000, respectively. For 2022 the fund returned 31.7% compared to -18.1% and -20.4% returns for the SP500TR and R2000 respectively. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Laughing Water Capital highlighted stocks like APi Group Corporation (NYSE:APG) in the Q4 2022 investor letter. Headquartered in New Brighton, Minnesota, APi Group Corporation (NYSE:APG) is a safety, specialty, and industrial services provider. On February 15, 2023, APi Group Corporation (NYSE:APG) stock closed at $21.99 per share. One-month return of APi Group Corporation (NYSE:APG) was 14.12%, and its shares gained 3.34% of their value over the last 52 weeks. APi Group Corporation (NYSE:APG) has a market capitalization of $5.144 billion.
Laughing Water Capital made the following comment about APi Group Corporation (NYSE:APG) in its Q4 2022 investor letter:
“APi Group Corporation (NYSE:APG) – APG is the world’s leading provider of Life Safety services, which can be thought of as our fire safety business. Earnings will improve organically through continuing to take share from mom & pop players, widening margins through route density and scale, improving business mix by pruning less profitable operations, and improving operations at a recently acquired (and previously neglected) European business.
Perception will change as the stink of formerly being a SPAC wears off, and as the market realizes that with much of revenue tied to statutorily mandated work, the ability to easily flex labor costs, and favorable working capital dynamics during downturns, this business is more resilient than it gets credit for.
As revenue grows organically 6-7% a year, and margins widen through increased efficiency and density, I believe EBITDA will grow by ~60% over the next 3-4 years, which suggests APG currently trades at ~6x the FCF the Company will generate, assuming conversion of preferred shares. Additional upside is possible, perhaps even likely, as there is a long track record of successful bolt on M&A, and a very capable sponsor group will seek to maximize upside through creative capital allocation. As perception improves and revenue mix moves increasingly toward statutorily required work, I believe this business could ultimately trade at 20x FCF, which would imply ~200% upside.”
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APi Group Corporation (NYSE:APG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held APi Group Corporation (NYSE:APG) at the end of the third quarter which was 29 in the previous quarter
We discussed APi Group Corporation (NYSE:APG) in another article and shared Greenhaven Road Capital’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
