Core Insights - SouthernSun Asset Management's "SouthernSun Smid Cap Strategy" reported a -3.72% gross return for Q4 2025, underperforming the Russell 2500 Index which returned 2.22% [1] - Over the trailing 12 months, the composite achieved a gross return of 5.19%, significantly lower than the Russell 2500 Index's 11.91% [1] - The letter draws parallels between the economic impacts of the 2014-15 oil price collapse and the current situation with artificial intelligence, emphasizing the need for careful analysis of associated risks [1] Company Highlights - APi Group Corporation (NYSE:APG) is highlighted as a top contributor in the SMID Cap strategy, with a stock price of $43.29 as of March 3, 2026 [2][3] - APG reported a 14% increase in revenues (10% organic) and a 15% rise in Adjusted EBITDA for Q3, marking its 21st consecutive quarter of double-digit inspection growth in North America [3] - The company has a market capitalization of $18.678 billion and completed 4 bolt-on acquisitions in the quarter, totaling 11 for the year [2][3] - APG's management expressed confidence in durable demand across core end markets and a record backlog, supporting expectations for continued growth into 2026 [3] - The company maintains a Net Debt/Adjusted EBITDA ratio of approximately 2x, indicating capacity for further acquisitions funded by free cash flow [3]

Market Overview - U.S. equity markets reached new all-time highs in Q4 2025, with the S&P 500 Index rising 2.66% and the Bloomberg U.S. Aggregate Bond Index increasing by 1.10% [1] - The U.S. economy showed resilience, although consumer confidence deteriorated toward year-end, raising concerns about future spending and the labor market [1] - The Federal Reserve adopted a cautious approach due to mixed economic signals and uncertainty around data [1] - Artificial intelligence remained a significant theme in the market [1] Fund Performance - The Aristotle Core Equity Fund (Class I-2) returned 3.15% in Q4 2025, outperforming the S&P 500 Index's return of 2.66% [1] - Both allocation effects and security selection contributed to the Fund's outperformance in the quarter [1] Company Spotlight: APi Group Corporation - APi Group Corporation (NYSE:APG) is a business services provider focusing on safety and specialty services, with a market capitalization of $19.457 billion [2] - The stock closed at $45.13 per share on February 26, 2026, with a one-month return of 8.56% and a 52-week gain of 72.38% [2] - APi Group operates through two main segments: Safety Services, which accounts for the majority of revenue and profit, and Specialty Services, which delivers critical infrastructure and industrial plant services [3] - The company employs 29,000 people across over 500 locations in 20 countries, serving diverse end markets such as commercial, healthcare, industrial, utilities, and government agencies [3] - APi Group generates substantial recurring revenue through statutory and contracted services [3]

Financial Performance & Strategy - APi Group's net revenues for 2024 were $7018 million, with Safety Services contributing 68% and Specialty Services 32%[9, 10] - Adjusted EBITDA for 2024 reached $893 million, with Safety Services accounting for 75% and Specialty Services 25%[11, 12] - The company aims for a long-term target of 60% of net revenues from inspection, service, and monitoring activities[21] - APi Group targets an Adjusted EBITDA margin of 16%+ and $3 billion+ cumulative adjusted free cash flow through 2028[158] - The company anticipates approximately 5% organic growth and $250 million annual spending on bolt-on M&A, targeting 7%+ reported CAGR through 2028[146] Safety Services - Safety Services: North America holds the 1 market share in North American fire protection[45] - Safety Services: North America has achieved 19 consecutive quarters of double-digit organic growth in inspection revenues[48] - Safety Services: International is on track to deliver $100+ million in value capture opportunities and achieve a 15%+ adjusted segment earnings margin by 2025[70, 72] Specialty Services - Specialty Services reported a gross margin increase from 15.9% in 2022 to 19.7% in 2024[109] - Specialty Services backlog shows organic growth, reaching 7% in Q1 2025[112] M&A Strategy - APi Group has a proven acquisition strategy with nearly 150 transactions in the last 20 years[121] - Bolt-on acquisitions have been completed at an average adjusted EBITDA multiple of less than 6x each year[121]