Andvari Associates, an investment management firm, released its third quarter 2023 investor letter, a copy of which can be downloaded here. In the initial nine months of 2023, Andvari saw a 6.9% increase net of fees, contrasting with the SPDR S&P 500 ETF’s 13% growth. Although Andvari performed well in the first half of the year, its performance weakened towards the end of the third quarter for two main reasons. The first was the resurgence of concerns about prolonged higher interest rates, which affected several assets that are highly sensitive to rate changes.Take a moment to review the fund’s top 5 holdings to gain insights into their primary investment choices for 2023.
In its Q3 2023 investor letter, Andvari Associates mentioned Rollins, Inc. (NYSE:ROL) and explained its insights for the company. Rollins, Inc. (NYSE:ROL) is an Atlanta, Georgia-based Exterminating and pest control services company with a $18.3 billion market capitalization. Rollins, Inc. (NYSE:ROL) delivered a 3.6% return since the beginning of the year, while its 12-month returns are down by -9.90%. The stock closed at $37.86 per share on November 9, 2023. Here is what Andvari Associates has to say about Rollins, Inc. (NYSE:ROL) in its Q3 2023 investor letter:
“Rollins (NYSE:ROL) is the holding company for multiple pest control businesses of which the largest and best-known is Orkin. After market close on September 6, the company announced the Rollins family would be selling up to $1.76 billion worth of its 50.5% ownership stake in Rollins. This caused the share price to decline nearly 10% the following morning. We decided to take advantage of this decline.
Andvari has admired Rollins for over a decade as the business has many attractive qualities. First, the company has the wind at its back as it operates primarily in the warmer climates of the southern states of America. This region is where bugs and other pests are most pernicious. This also happens to be the region where people continue to migrate for work and for retirement. This migration is a steady trend that will continue to drive the growth of Rollins at an above average rate for decades to come.
Second, Rollins is one of the largest companies that is consolidating a very fragmented industry. For context, there are 17,670 pest control companies in the U.S. with combined annual revenues of $11.04 billion.1 Over just the last three years, Rollins has acquired over 100 pest control businesses. Rollins’ annual revenues in the U.S. will be about $2.87 billion for 2023, so this means it has about a 26% market share. A tremendous opportunity to grow organically and through acquisitions still remains for the company.
Third, Rollins provides valuable services that are a small portion of the total cost of either owning a home or operating a business. For a business owner, rules and regulations make it so they must purchase pest control services from someone. This gives Rollins’ pest control brands the ability to raise prices 4%–5% a year very easily. We also view pest control services as non-discretionary and recession resistant. Few home or business owners will tolerate pests within their dwellings. Thus, revenues for Rollins are highly predictable: about 80% of revenues are recurring…” (Click here to see the full text)
A pest control service technician spraying insecticide in a residential property. Our calculations show that Rollins, Inc. (NYSE:ROL) does not belong on our list of the 30 Most Popular Stocks Among Hedge Funds. Rollins, Inc. (NYSE:ROL) was in 34 hedge fund portfolios at the end of the second quarter of 2023, compared to 36 funds in the previous quarter. Rollins, Inc. (NYSE:ROL) delivered a -7.14% return in the past 3 months. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q3 2023 page.Suggested Articles:
Disclosure: None. This article is originally published at Insider Monkey.