Investment management firm Greenhaven Road Capital has released its fourth quarter 2023 investor letter. You can download a copy of the same here. In the fourth quarter, the fund's return was approximately 15%, for an annualized return of approximately 51%. The reason for all of the gains in the fourth quarter was due to multiple expansions and patience during the quarter as investors were willing to pay a higher P/E or P/S for the same underlying company . Additionally, you can check out the fund's top five holdings to learn about the best stocks for 2023.
Greenhaven Road Capital featured stocks such as APi Group Corporation (NYSE:APG) in its Q4 2023 Investor Letter. APi Group Corporation (NYSE:APG), headquartered in New Brighton, Minnesota, is a provider of safety, professional and industrial services. On February 14, 2024, APi Group Corporation (NYSE: APG) stock closed at $34.95 per share. His 1-month return for APi Group Corporation (NYSE: APG) is his 9.94%, and the company's stock has increased his 57.72% in value over the past 52 weeks. APi Group Corporation (NYSE:APG) has a market capitalization of $8.51 billion.
Greenhaven Road Capital said the following about APi Group Corporation (NYSE:APG) in its Q4 2023 investor letter:
“Api Group Co., Ltd.” (NYSE:APG) – APi Group is one of the most difficult companies we own to analyze from the outside. Fortunately, demand for the company's core fire inspection and repair business is very stable, as fire inspections are statutory and required by law for building use. APi uses its inspection business to drive its repair business, which also has little discretion. Homeowners can put up with a leaky roof for a while, but a broken sprinkler system must be fixed immediately. API's business improvements come from thousands of small actions, such as acquiring new customers, improving truck route density, and managing purchases throughout the supply chain. The company is making major acquisitions in Europe and will benefit from higher prices and relief from supply chain disruptions.
With hundreds of acquisitions under its belt, APi Group has a core competency in successfully acquiring and integrating companies. With debt levels decreasing towards the target level of 2.5x, which is expected to be achieved in the latest quarter, the company can continue to pursue value-enhancing M&A and other capital allocation opportunities. Although APi is the number one player in the fire protection systems market with ~5% market share, the competitive landscape is highly fragmented and prone to takeovers/roll-ups.
Like PAR, APi was an overnight success over a decade in the making. Initially focused on a contract-based business, the company has strategically shifted to a recurring revenue model that focuses on fire protection system maintenance rather than initial installation. Between 2007 and 2022, the more attractive inspection, service and monitoring business grew from his 15% to more than 50% of total revenue. However, the company does not stop there, and looking to the future, he is aiming for a composition ratio of over 60%. Higher multiples should be assigned by market participants to companies with higher recurring revenues, economy-wide resilience due to statutory testing requirements, and growing profits through operating leverage. For API groups, multiple extensions are not required for success. Intrinsic revenue growth and incremental growth through M&A should increase profits and provide attractive investment returns on their own. Multiple expansions will be the most important factor. ”
A team of engineers surveying a construction site in preparation for new underground infrastructure.
APi Group Corporation (NYSE:APG) is not included in this list of 30 most popular stocks among hedge funds. According to our database, 38 hedge fund portfolios held his APi Group Corporation (NYSE: APG) at the end of the third quarter, compared to 38 in the previous quarter.
We discussed APi Group Corporation (NYSE:APG) in a separate article and shared Tourlite Capital Management's view on the company. Additionally, for investor letters from hedge funds and other leading investors, please visit our Hedge Fund Investor Letters Q4 2023 page.
Recommended articles:
Disclosure: None. This article was originally published on Insider Monkey.
