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Does Rentokil Initial (RTO) Have ~100% Upside Potential?

Voss Capital, LLC an investment management company, released its first-quarter 2024 investor letter. A copy of the letter can be downloaded here. Voss Capital’s funds, Voss Value Fund, LP, and the Voss Value Offshore Fund, Ltd returned +9.2% and +9.0% to investors net of fees and expenses respectively, in the first quarter compared to a +5.2% return for the Russell 2000 Index, 2.9% return for the Russell 2000 Value Index, and +10.6% return for the S&P 500 Index. The fund’s total gross exposure stood at 167.8% and the net long exposure was 92.9% at the end of the first quarter. The weight of the fund’s top 10 longs was 81.1% and the top 10 shorts was 24.2%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.

Voss Capital highlighted stocks like Rentokil Initial plc (NYSE:RTO) in the first quarter 2024 investor letter. Rentokil Initial plc (NYSE:RTO) is a route-based services provider. Rentokil Initial plc’s (NYSE:RTO) one-month return was 3.65%, and its shares lost 33.23% of their value over the last 52 weeks. On May 31, 2024, Rentokil Initial plc (NYSE:RTO) stock closed at $26.98 per share with a market capitalization of $13.552 billion.

Voss Capital stated the following regarding Rentokil Initial plc (NYSE:RTO) in its first quarter 2024 investor letter:

“Rentokil Initial plc (NYSE:RTO) is the global leader in pest control, with more than double the revenue of its next largest competitor. Although it is primary listing is in the UK, over 60% of earnings are generated in North America. Pest control is a remarkably high-quality business with largely recurring revenue, high returns on capital employed, and low cyclicality. The largest players in the industry also have attractive inorganic growth opportunities by consolidating a still fragmented market. The pest control market in the US has grown at a 4.9% CAGR over the last ten years, well above the rate of GDP growth, and RTO has its sights on growing organic revenue at 1.5x the market rate over the medium term. It is not hard to see why these businesses historically trade at a significant premium to the S&P 500.

In October 2022, RTO completed the acquisition of Terminix, a US focused pest control company. By September of 2023, it was apparent that the substantial integration effort had led to a slowdown in North American organic revenue growth. As all eyes became firmly affixed to the bumps in the road, the stock was ruthlessly punished, and our opportunity was born. RTO now trades at a substantial discount to relevant transaction comps, publicly traded comps, and its own historical trading history, as recency bias conveniently provides skeptics a rallying cry. From the transaction comps that we have data on over the last 10 years where the target had EBITDA >$10M, deals ranged from 15.3x-25.6x EBITDA yet RTO trades at 10.1x 2025 consensus EBITDA (at which point a majority of the Terminix cost synergies will be realized), making it a potential candidate for a PE buyout. Its closest public comp is ROL, which trades at 27.1x 2025 consensus EBITDA. RTO itself has averaged 15.2x forward EBITDA over the last five years, including its recent selloff.

We believe once RTO can move past the initially tough integration period and show improved organic growth, the shares have ~100% upside over the next 18 months simply by re-rating to its own historical multiple, which would be on the low end of transaction comps and still imply a ~40% discount to the well-run ROL. The Company is currently exploring US Dollar reporting and we believe a subsequent re-listing to the US would help re-rate the stock meaningfully, a la CRH.”

A specialist cleaning service team in full protective equipment removing hazardous waste.

Rentokil Initial plc (NYSE:RTO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held Rentokil Initial plc (NYSE:RTO) at the end of the first quarter which was 15 in the previous quarter. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.

AI, Tariffs, Nuclear Power: One Undervalued Stock Connects ALL the Dots (Before It Explodes!)

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

AI is eating the world—and the machines behind it are ravenous.

Each ChatGPT query, each model update, each robotic breakthrough consumes massive amounts of energy. In fact, AI is already pushing global power grids to the brink.

Wall Street is pouring hundreds of billions into artificial intelligence—training smarter chatbots, automating industries, and building the digital future. But there’s one urgent question few are asking:

Where will all of that energy come from?

AI is the most electricity-hungry technology ever invented. Each data center powering large language models like ChatGPT consumes as much energy as a small city. And it’s about to get worse.

Even Sam Altman, the founder of OpenAI, issued a stark warning:

“The future of AI depends on an energy breakthrough.”

Elon Musk was even more blunt:

“AI will run out of electricity by next year.”

As the world chases faster, smarter machines, a hidden crisis is emerging behind the scenes. Power grids are strained. Electricity prices are rising. Utilities are scrambling to expand capacity.

And that’s where the real opportunity lies…

One little-known company—almost entirely overlooked by most AI investors—could be the ultimate backdoor play. It’s not a chipmaker. It’s not a cloud platform. But it might be the most important AI stock in the US owns critical energy infrastructure assets positioned to feed the coming AI energy spike.

As demand from AI data centers explodes, this company is gearing up to profit from the most valuable commodity in the digital age: electricity.

The “Toll Booth” Operator of the AI Energy Boom

  • It owns critical nuclear energy infrastructure assets, positioning it at the heart of America’s next-generation power strategy.
  • It’s one of the only global companies capable of executing large-scale, complex EPC (engineering, procurement, and construction) projects across oil, gas, renewable fuels, and industrial infrastructure.
  • It plays a pivotal role in U.S. LNG exportation—a sector about to explode under President Trump’s renewed “America First” energy doctrine.

Trump has made it clear: Europe and U.S. allies must buy American LNG.

And our company sits in the toll booth—collecting fees on every drop exported.

But that’s not all…

As Trump’s proposed tariffs push American manufacturers to bring their operations back home, this company will be first in line to rebuild, retrofit, and reengineer those facilities.

AI. Energy. Tariffs. Onshoring. This One Company Ties It All Together.

While the world is distracted by flashy AI tickers, a few smart investors are quietly scooping up shares of the one company powering it all from behind the scenes.

AI needs energy. Energy needs infrastructure.

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This company has its finger in every pie—and Wall Street is just starting to notice.

Wall Street is noticing this company also because it is quietly riding all of these tailwinds—without the sky-high valuation.

While most energy and utility firms are buried under mountains of debt and coughing up hefty interest payments just to appease bondholders…

This company is completely debt-free.

In fact, it’s sitting on a war chest of cash—equal to nearly one-third of its entire market cap.

It also owns a huge equity stake in another red-hot AI play, giving investors indirect exposure to multiple AI growth engines without paying a premium.

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The Hedge Fund Secret That’s Starting to Leak Out

This stock is so off-the-radar, so absurdly undervalued, that some of the most secretive hedge fund managers in the world have begun pitching it at closed-door investment summits.

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Why? Because excluding cash and investments, this company is trading at less than 7 times earnings.

And that’s for a business tied to:

  • The AI infrastructure supercycle
  • The onshoring boom driven by Trump-era tariffs
  • A surge in U.S. LNG exports
  • And a unique footprint in nuclear energy—the future of clean, reliable power

You simply won’t find another AI and energy stock this cheap… with this much upside.

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…