Andreas Halvorsen (Trades, Portfolio), head of Viking Global Investors, disclosed earlier this week he upped his stake in APi Group Corp. (APG, Financial) by 24.39%.
Taking cyclical and secular industry trends into consideration, the guru's Connecticut-based hedge fund selects stocks based on its understanding of the business' fundamentals and management team. Halvorsen was a former protégé of Tiger Management's Julian Robertson (Trades, Portfolio).
According to GuruFocus Real-Time Picks, a Premium feature, Halvorsen invested in 8.13 million shares of the New Brighton, Minnesota-based company on Jan. 3, impacting the equity portfolio by 0.58%. The stock traded for an average price of $25.75 per share on the day of the transaction.
This is the first time the guru has added to the stake since establishing it in the second quarter of 2020. Halvorsen now holds 41.5 million shares total, which represent 2.95% of the equity portfolio. GuruFocus estimates he has gained 92.11% on the investment so far.
The company, which provides industrial, safety and specialty services to the construction industry, has a $5.86 billion market cap; its shares were trading around $25.76 on Thursday with a forward price-earnings ratio of 20.66, a price-book ratio of 2.46 and a price-sales ratio of 1.3.
Since its debut on the New York Stock Exchange in April 2020 after being acquired by a special purpose acquisition company in October 2019, the stock has climbed over 150%.
In November, the company released its third-quarter financial results, posting adjusted earnings of 35 cents per share on $1 billion in revenue. While sales were up 9.9% from the prior-year quarter, earnings were down slightly.
APi provided an update for its full-year 2021 guidance in December. The company is anticipating net revenue of $3.8 billion, up from previous projections of $3.65 billion to $3.75 billion, and adjusted Ebitda of $405 million.
On Jan. 3, the company also completed its previously announced $3.1 billion acquisition of Chubb Fire & Security from Carrier Global Corp. (CARR, Financial).
In a statement, APi President and CEO Russ Becker commented on the deal.
“We begin 2022 as the world’s leading life safety services provider,” he said. “Since announcing the acquisition on July 27, 2021, the level of excitement from our international customers and our teams about the opportunities the combined platform will bring has been extremely encouraging. This validates our belief that the transaction will be highly accretive with compelling synergies and that it will help accelerate revenue growth through cross-selling certain products and services.”
GuruFocus rated APi’s financial strength 5 out of 10. As a result of issuing $1.5 billion in new long-term debt over the past three years, the company has low interest coverage. The Altman Z-Score of 2.59 indicates the company is under some pressure since it has recorded losses in operating income and declining revenue per share in recent years. The return on invested capital is also being eclipsed by the weighted average cost of capital, meaning the company is struggling to create value while growing.
The company’ s profitability scored a 2 out of 10 rating on the back of margins and returns on equity, assets and capital that underperform a majority of competitors. Regardless, APi has a moderate Piotroski F-Score of 6 out of 9, which means operations are typical for a stable company.
With a 17.86% stake, Halvorsen is APi Group’s largest guru shareholder. Chuck Royce (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also have positions in the stock.
Portfolio composition
Over half of Halvorsen’s $35.94 billion equity portfolio, which was composed of 95 stocks as of the end of the third quarter of 2021, is invested in the health care and technology sectors.
Other companies in the industrials sector Viking Global had positions in as of Sept. 30 included Canadian Pacific Railway Ltd. (CP, Financial), Parker Hannifin Corp. (PH, Financial), General Electric Co. (GE, Financial), Ingersoll Rand Inc. (IR, Financial) and Deere & Co. (DE, Financial).
