15 Small-Cap Construction and Materials Stocks Hedge Funds Are Buying

4. APi Group Corp. (NYSE:APG)

Market Capitalization as of April 28: $10.38 billion

Number of Hedge Fund Holders: 48

APi Group Corp. (NYSE:APG) is a construction-related company that designs, installs, inspects, and services integrated systems, such as heating, ventilation, and air conditioning solutions. It also provides various infrastructure services like the maintenance & repair infrastructure, engineering & design, fabrication, installation, access & road, and other services.

The Safety Services segment is the largest part of APi Group’s business and reported revenues of $1.4 billion in Q4 2024, which was up 13% year-over-year. This was driven by a 4.7% organic increase, which was further fueled by double-digit inspection revenue growth within the company’s US Life Safety business. There was also a 7% organic growth in inspection, service, and monitoring revenues across the entire Safety Services segment.

This segment is now positioned as a more pure-play life safety business that encompasses fire protection, electronic security, and elevator & escalator services. APi Group Corp. (NYSE:APG) is also pursuing M&A opportunities within fire protection, electronic security, and elevator and escalator services to further expand its Safety Services offerings.

Maran Capital Management is confident in the company’s continued growth and stated the following regarding APi Group Corporation (NYSE:APG) in its Q4 2024 investor letter:

“As we look to 2025 and beyond, we have great confidence in the business, our backlog, our balance sheet and our ability to continue to evolve APi into an even lower CapEx asset-light business focused on high-margin statutorily mandated services.” – 3Q 2024 earnings call

We have owned APi Group Corporation (NYSE:APG) for a number of years—since it was a sub-$1 billion-dollar market cap, pink-sheet listed, de-SPAC. It is now a ~$10 billion market cap, ~$1 billion EBITDA, NYSE-listed behemoth (at least by our usual standards), but I still believe it can continue to appreciate from here. APi is a possible long-term, buy-and-build compounder, but it still has some “special situation” characteristics in the form of a few upcoming catalysts.

Managements’ share-based compensation scheme matures at year-end 2026, so they are incentivized to maximize APG’s stock price at that time. The company recently announced that starting in 2025, it will report its HVAC business under the Specialty Services segment, which will allow it to highlight its core Life Safety business as a clean segment. This change will certainly highlight the quality of APi’s “best” segment, but it would also be a logical step if a split of the two major business segments were being planned.

Regardless of whether APi executes a spin of its Specialty Services business, it will lay out strategic initiatives for both segments at an upcoming investor day in NYC. APi Group has made excellent progress on its last multi-year plan, and I’m looking forward to seeing what they will target in the next three-to-five years.”