We recently published a list of 7 Stocks Billion Dollar Hedge Fund Voss Capital Is Crazy About. In this article, we are going to take a look at where Rentokil Initial (NYSE:RTO) stands against other stocks that Voss Capital is crazy about.
A fund management company, Voss Capital is based in Houston and was founded in 2011 by Travis Cocke who currently serves as the fund’s General Partner and Chief Investment Officer. He manages Voss’ funds. Interestingly, Voss is an acronym which stands for Value-Oriented Special Situations.
Before launching Voss, Cocke served as a Generalist Research Analyst at Ascendant Advisors LLC. from August 2009 to July 2010. Cocke was also an intern at the Teacher Retirement System of Texas during the summer of 2008.
He obtained a Bachelor of Business Administration in Finance from Texas A&M in 2009.
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In addition to concentrating on value stocks and special situations, as implied by the words that make up Voss’ acronym, the fund manager focuses on fundamentals. Special situations are unusual developments that affect companies. Additionally, Voss seeks to invest in stocks that it believes can double within three years.
Our Methodology
The following data is gathered from Voss Capital’s investment letter for the first quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here). That’s why you should pay close attention to this important indicator.
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Rentokil Initial (NYSE:RTO)
Value of Voss Capital’s 13F Position (6/30/2024): $56.2 million
According to Voss, UK-based Rentokil Initial (NYSE:RTO) “is the global leader in pest control,” as its sales are over 100% higher than those of its largest competitor.
“Pest control is a remarkably high-quality business with largely recurring revenue, high returns on capital employed, and low cyclicality,” Voss reported.
In Q3, Rentokil Initial (NYSE:RTO)’s organic revenue increased 2.6% versus the same period a year earlier. However, the organic sales of its North America business only rose 1.4% YOY. Rentokil Initial (NYSE:RTO) expects its adjusted operating margin for the full year to come in at 15.5%, and it noted that it would take cost-cutting measures going forward.
Analysts, on average, expect its earnings per share to climb to 86 cents in 2025 from 82 cents this year,
Calling the valuation of Rentokil Initial (NYSE:RTO) stock attractive, Voss reported that the shares had been punished because the company was having difficulty integrating U.S.-based Terminix which it had acquired in October 2022. Voss predicted that Rentokil Initial (NYSE:RTO) would rebound once it overcome these difficulties and its growth accelerates. The fund manager estimated that the shares could surge about 100% in 18 months.
Rentokil Initial (NYSE:RTO) has dropped 5% since May 24.
Broyhill Asset Management stated the following regarding Rentokil Initial plc (NYSE:RTO) in its Q3 2024 investor letter:
“Rentokil Initial plc (NYSE:RTO) is a UK-based pest control company that grew its US presence by acquiring Terminix in 2022. The industry is largely fragmented and has the tailwind of a warming environment, expanding the seasons and geographies where pests thrive. Trading at a steep discount to its nearest peer, Rollins, we see plenty of room for upside as activist investor Nelson Peltz holds management accountable during the Terminix integration.”
Overall, RTO ranks 3rd on our list of stocks billion dollar hedge fund Voss Capital is crazy about. While we acknowledge the potential of RTO, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RTO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.