APi Group (APG) Investment: A Success in Safety and Growth

Greystone Capital Management, an investment management company, released its second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the median account return for separate accounts managed by the firm was +14.8%, net of fees. The fund favorably compared to the S&P 500 and Russell 2000 returns of +10.9% and +8.5% during the quarter. The median account returned +6.3%, net of fees, year-to-date, exceeding the S&P 500 and Russell 2000 returns of +6.2% and -1.8% year-to-date. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025.

In its second-quarter 2025 investor letter, Greystone Capital Management highlighted stocks such as APi Group Corporation (NYSE:APG). APi Group Corporation (NYSE:APG) is a safety and specialty services provider. The one-month return of APi Group Corporation (NYSE:APG) was 2.16%, and its shares gained 53.23% of their value over the last 52 weeks. On August 1, 2025, APi Group Corporation (NYSE:APG) stock closed at $35.07 per share, with a market capitalization of $14.585 billion.

Greystone Capital Management stated the following regarding APi Group Corporation (NYSE:APG) in its second quarter 2025 investor letter:

"Our investment in APi Group Corporation (NYSE:APG), our fire and life safety business, is a great example of our process identifying quality businesses with excellent management teams that are misunderstood and mispriced. APG shares have appreciated 5x since going public in 2020 and still check many of our boxes including scale advantages, durability, a growing industry and excellent management team who has proven to be strong operators and capital allocators.

APG remains in our top five positions due to the runway for organic growth and M&A, which should increase free cash flow per share over time. Growing volumes within Safety Services, price increases and the continued mix shift toward inspection-related revenues should provide 5-7% organic growth revenue growth into the foreseeable future. That, mixed with cost leverage, lower capex and higher margin revenue means free cash flow conversion moves toward management’s target of 80%. As they’ve done historically, APG can use their free cash flow to acquire businesses which they can improve on both the gross margin and EBITDA margin fronts through further cost leverage and an inspection revenue focus. The recent acquisition of Elevated Facility Service Group broadens APG’s service offering outside of fire safety and brings with it additional organic growth opportunities.

APG is still being valued closer to a cyclical industrial as opposed to the durable, recurring revenue, acyclical, cash generative business they are. I can conservatively underwrite a 15-25% return per year during the next 3-5 years, with growth in free cash flow and slight multiple expansion as the market continues to realize the strength of APGs business and the improved cash flow characteristics, deserving of a higher multiple. APG has the ability to generate around $1.3B in free cash flow by 2028, against a market cap of $14B. With continued execution APG could compound in value for years."

APi Group Corporation (NYSE:APG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 49 hedge fund portfolios held APi Group Corporation (NYSE:APG) at the end of the first quarter which was 48 in the previous quarter. For the second quarter, APi Group Corporation (NYSE:APG) reported a 15% rise in net revenues, with more than 8% of that growth coming from organic sources, reflecting robust performance in both segments. While we acknowledge the potential of APi Group Corporation (NYSE:APG) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered APi Group Corporation (NYSE:APG) and shared the list of small-cap construction and materials stocks hedge funds are buying. In addition, please check out our hedge fund investor letters Q2 2025 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.