Greenhaven Road Capital, an investment management company, released its fourth quarter 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the Fund returned approximately 15%, bringing the full-year returns to approximately 51%. The reason for all of the Q4 returns was perseverance along with multiple expansions during the quarter as investors were willing to pay a higher P/E or P/S for the same underlying company. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Greenhaven Road Capital featured stocks such as APi Group Corporation (NYSE:APG) in the fourth quarter 2023 investor letter. Headquartered in New Brighton, Minnesota, APi Group Corporation (NYSE:APG) is a safety, specialty, and industrial services provider. On February 14, 2024, APi Group Corporation (NYSE:APG) stock closed at $34.95 per share. One-month return of APi Group Corporation (NYSE:APG) was 9.94%, and its shares gained 57.72% of their value over the last 52 weeks. APi Group Corporation (NYSE:APG) has a market capitalization of $8.51 billion.
Greenhaven Road Capital stated the following regarding APi Group Corporation (NYSE:APG) in its fourth quarter 2023 investor letter:
“APi Group Corporation (NYSE:APG) – APi Group is one of the more difficult companies we own to analyze from the outside. Fortunately, the demand for their core fire inspection and repair business is very stable, as fire inspections are statutory and are required by law for a building to be used. APi uses their inspection business to drive their repair business, which is also largely non-discretionary. A landlord can tolerate a leaky roof for a while but has to repair a broken sprinkler system immediately. The improvements of APi’s business come through thousands of small actions, including winning of new customers, improving route density for their trucks, and managing purchases throughout their supply chain. The company is digesting a large European acquisition and will realize the benefits of price increases and relief from supply chain disruptions.
APi Group has a core competency in successfully acquiring and integrating companies as they have made hundreds of acquisitions. As their debt levels are reduced toward their target level of 2.5x, which they are anticipated to have achieved in the most recent quarter, the company can continue the playbook of value accretive M&A and other capital allocation opportunities. While APi is the #1 player in the fire protection systems market with ~5% market share, the competitive environment is highly fragmented and conducive to acquisitions/roll-ups.
Like PAR, APi is another overnight success that was 10+ years in the making. Originally focused on contract-centric business, the company made the strategic shift to a recurring revenue model focused more on servicing fire safety systems than initial installation. Between 2007 and 2022, the more attractive inspection, servicing, and monitoring business grew from 15% of total revenue to 50%+. But the company isn’t stopping there and is targeting a 60%+ mix looking ahead. A business with high recurring revenue, resiliency to the overall economy due to statutory inspection requirements, and expanding margins through operating leverage should be assigned a higher multiple by market participants. With APi Group, we don’t need multiple expansion to do well as organic revenue growth and incremental growth through M&A will accrue to earnings growth that alone should generate attractive investment returns – multiple expansion would be a cherry on top.”
A team of engineers surveying a construction site in preparation for a new underground infrastructure.
APi Group Corporation (NYSE:APG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held APi Group Corporation (NYSE:APG) at the end of third quarter which was 38 in the previous quarter.
We discussed APi Group Corporation (NYSE:APG) in another article and shared Tourlite Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q4 2023 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.
