Matt Luneburg, Sr. Research Analyst
Michael Raab, Portfolio Manager, Sr. Research Analyst
Growth investing often focuses on innovation, but Sands Capital’s Michael Raab and Matthew Luneburg show Rentokil as an example of a growth business that favors refining what’s already working. Rentokil, a pest control industry leader, has consolidated its technician service routes to achieve efficiencies and a significant competitive advantage. Listen as Michael and Matt talk about how we built conviction in what may seem an unlikely investment for Sands Capital.
00:43 The initial attraction of Rentokil
04:47 Appeal of a route-density business
06:16 Drivers of the demand for pest control
08:52 Do analysts start research with a specific portfolio in mind?
10:58 On-the-ground research examples
13:14 Super Bowl of pest control
16:36 How companies like Rentokil fit into portfolio construction
19:33 Global Leaders’ dual mandate for growth and volatility management
21:06 How Rentokil’s growth changed during the pandemic
25:56 How swimming competitively influenced Mike Raab
28:56 How Matt Luneberg started investing in consumer businesses
Kevin: Welcome to What Matters Most, Sands Capital’s podcast series in which we explore some of the trends and businesses that are propelling the pace of global innovation and changing the way we live and work today and into the future. Today, we’ll speak with Sands Capital Portfolio Manager and Senior Research Analyst Michael Raab and Senior Research Analyst Matt Luneburg about Rentokil, a global pest-control business with 50 percent of its customers in the United States.
A pest-control business seems like an unlikely investment for Sands Capital, which has traditionally focused on fast-growing, innovative businesses, primarily in the technology, life sciences, and financial spaces. I’m going to turn quickly to my guests to lead us through what I expect to be an enlightening discussion.
Matt, Mike, thank you for joining us today to talk about Rentokil. Matt, we’ll start with you. Let’s start with a little bit about how you found Rentokil and what made you think it was worth the deep research dive into the company?
Matt Luneburg: Thanks, Kevin. It’s a pleasure to be with you guys today and happy to talk about Rentokil, which is a great growth business—and that’s what we do with Sands.
And I’ve been at Sands for over 15 years at this point. So I’ve seen growth come in all sorts of different forms, whether it’s high-flying software businesses or businesses that just grind out very strong growth with great cash flow and economics over long periods of time. One is not better than the other; both can create tremendous amounts of value.
And we found that there are certain businesses across a variety of business spaces that just have an unusual amount of persistence to the underlying growth in the industry, which lends itself to compounding earnings over very extended periods of time. Businesses that have massive moats around them as a function of the industry structure and—whether it’s scale or technology—that enabled them to retain and enhance their leadership position over those long periods of time. Rentokil, on the surface when we first found it, seemed to have those hallmarks. An industry that’s likely to grow two to three times the rate of GDP over the long term, very attractive potential for industry consolidation and massive advantages to scale. So from there, we just started peeling back the onion, and it turned out that our initial suspicions were confirmed, and it’s a great business that we think will add a lot of value to client portfolios in the years ahead.
Kevin: So let’s dive into that a little bit more. I don’t think the pest-control industry is widely known as a well-covered industry or, at least, by our listeners, I’m guessing. So maybe tell us what you found interesting about that industry generally. And then specifically, what is it about Rentokil that stood out for you as a potential leader in that space?
Matt Luneburg: I’m sure everybody listening here today has probably seen an Orkin, a Terminix, Steritech, Ehrlich or your local Bob’s pest truck driving around the neighborhood at some point.1 In fact, you probably saw one today and, chances are, you didn’t even realize it. So those are all pest-control technicians, for the most part, driving between jobs, and their job at the end of the day is to keep unwanted critters out of your home or your business, and the service they provide encompasses a lot of different things, depending on what your specific problem is—whether it’s insects, rodents, reptiles, birds, who knows—maybe all of the above, if you’re really unlucky.
But it’s mostly contracted work for which the customer—you, in some cases, a big business in others—are making a recurring payment. So you pay quarterly or annually a fee, and they show up a few times a year to make sure that your environment is free of unwanted visitors.
Kevin: So let me throw the same question to you, Mike. What did you find most interesting about Rentokil?
Michael Raab: Yeah. This is a critical need that will never, ever, ever go away and is growing, as Matt said. So what you get here is a really, really long duration to this growth. This will surprise a lot of people, but 80 percent of Rentokil’s business is contracted work. Meaning, there’s a subscription nature to it. And only 20 percent is “I saw a bug in my house; please get rid of it. But hopefully I’ll never see you again.” But most people, once they experience it say, “You know what, I think I need to have a recurring service here.”
But when I stepped back, and you really start to dig into the business and the industry dynamics, what you see is that it’s a natural oligopoly situation, and some of the best businesses out there have these structural dynamics that actually drive competitive advantage.
Matt Luneburg: Yeah. It might sound simple on the surface. But executing this wealth scale is really tough and requires a combined expertise in the hard sciences, whether it’s biology, entomology, chemistry, as well as really strong human resource management, CRM, and expertise in routing and logistics and, increasingly, IT and data science.
But when you have what it takes to execute well, it’s ultimately a route-density business, something we know a lot about at Sands Capital, and it comes with tremendous economics of scale involved. So that advantage tends to compound nicely over time.
Michael Raab: Yeah. It’s pushing the industry towards either a winner take all or a few big winners that reap most of the profits in that industry. And people are really familiar with the network effect or some economy of scale. You only need so many global payment networks or semi fabs out there, right? It costs so much money to build one. But in this case, it’s really that route-density dynamic that Matt was talking about.
You see these guys driving around in the trucks, making their stops. If you can have a greater amount of your business concentrated in an area that’s closer to get to, or that you can eliminate the time between visits. Some of these folks spend most of their time literally driving or stuck in traffic. All right, so if you can go from six stops to eight stops, that’s a big deal. And it also means you can probably lower your prices and your return on capital—on the investment, on the technician who you’re paying by the hour or by the job, on the equipment that you have to buy—really start skyrocketing at a certain point.
So we’ve seen that pattern across other business models. This is not unique to pest control. But it’s a big point in terms of getting me interested. The other thing is there’s really no way to out-innovate or disrupt this business.
Matt Luneburg: Yeah. Growth in the industry is not only very persistent, but we think there’s a nontrivial possibility that it may even accelerate industrywide if we look over the next five or 10 years. But the roots of this business really date to the beginnings of human society and for good reason. Pests present both real and perceived risks to humans, and we generally don’t want to be around them for that reason. Five hundred thousand years ago, or whenever it was, early man didn’t want a saber-toothed tiger living in his cave any more than you or I want rattlesnakes in our basement.
So there’s a fundamental need for this business in modern society. And, generally speaking, the more society advances and the more money people have, the less tolerant they become of pests being in close proximity to them. And that’s both for superficial reasons and also real public safety concerns. If we can afford it, we’d prefer not to be sharing our living and working spaces with cockroaches. And there’s some very serious issues involving public health and safety that also are addressed via the industry.
The second big driver here is urbanization. Growing cities tend to offer ideal living and breeding conditions for many common pests. So think about the plentiful food in an urban environment. Generally, the temperatures are warmer, which is directly correlated with pests’ ability to breed from a biological standpoint. And they also come with abundant harborage where these pests can live, which, unlike in the wild and in more rural areas, tends to be very closely related to where we live. So in 1990, 40 percent of the world’s population lived in urban areas. That’s grown to about 55 percent or so today. And it’s on its way to 70 percent in 2050.2
And I think the last point I’ll make here is that climate change is also influencing growth here on the margin. A warmer world generally means more pest problems because it impacts their metabolism. It impacts their rate of reproduction. So very small changes in ambient temperature can lead to explosive growth in pest populations. So to the extent that the world becomes warmer over time, you’re likely to have much more significant pest problems in the years ahead. And underlying all of this is, as we talked about before, because of the low elasticity of demand here, you have very recession-resilient demand for these services. Bugs don’t read the news, and that shows up in customer retention rates of 90 percent-plus for leading players like Rentokil.
Kevin: Let me ask you, too, Matt, as you drill down on Rentokil one kind of point I think people would love to hear you make, too, is, when you start the research process, are you thinking specifically about a portfolio that that business would go into? Explain what your objectives are as you start down the path of research on companies.
Matt Luneburg: I think the short answer there, Kevin, to start is I prioritize work based on what I think is the most compelling opportunity at the time. Sometimes, things are just so obvious as far as their relevance, whether it’s broadly across Sands or a specific portfolio need. You prioritize accordingly.
Michael Raab: Yeah. At Sands Capital, we have a very clear investment philosophy to find the best growth businesses all around the world. And then what we have done is set up a structure that can do it. And the key things that stick out to me are the first is a culture of shared ownership. So I often tell people: If you’re sitting in on one of our meetings or on a trip, you might have a hard time spotting who the portfolio manager and the analyst is because it’s this really integrated process.
Matt Luneburg: But the first step is: Is this a really compelling investment opportunity that’s deserving of my time? If so, we’ll alert all of the portfolio managers and strategy teams that, hey, we’re looking at this idea. This is what the business does. That’s typically after what we call a “shallow dive.” So a couple hours of reading so we know enough to make a call on whether the business deserves further work, and then everybody knows that we’re working on it so they can opt into the process if they’re interested. And if it’s really compelling, I’ll occasionally run into people’s offices and start jumping up and down on their desks whether they like that or not. You develop a feeling for where a business might have a meaningful role across the firm.
Michael Raab: Yeah, Matt said a lot I think on what it looks like when we’re doing the research on a company like Rentokil. Just from a high level. I think there’s a lot of different ways to invest, and no one is more right necessarily than the other, but the key thing you need is a clear investment philosophy. And then you create a system around that so you can execute it.
Kevin: So this sounds like the kind of company that is well suited to on the ground research, maybe you guys could give us some examples of what you did in that respect?
Matt Luneburg: Sure. Once we’ve decided that a business is deserving of more work, we’ll take our research to what we call a deep dive. And, as Mike alluded to, that tends to be a very integrated process between analysts and portfolio managers, where we’re sharing useful background reading to help give everyone involved in the decision-making process context around both the business itself and the industry in which it’s operating. At that point in the research, we’ll typically go around and attend relevant industry conferences and events to bring that to life.
When we were working on Rentokil, we met with management during the research process, we also took the opportunity to go and visit their research and training facility in the U.K. And I was overjoyed to see the responses of Mike and some of my other colleagues when we took a tour of the rodent research room, which was a variety of these restaurant food surface setups, where they had rats just running around so they could better calibrate how the animals were moving in the space, how they were getting in, how they were getting out. I’m sure Mike has a distinct memory of that experience as well.
Michael Raab: Well, at first, I couldn’t believe that something like that actually existed, so of course I had to see it. The main memory I have is how bad it smelled, but yeah, it was fascinating. It was literally a group of people trying to make a better mousetrap. When you really look at this space, you really do start to understand that it’s a problem-solving business, and there’s opportunities to make small improvements to the tools that are used. We saw a rat actually jump like four feet in the air. Who would’ve thought? Right?
People are doing things to say, “This will keep a rat out,” or they have grating that you would put over, say, a storm drainpipe that will keep rodents out. It absolutely will not because if you test it and you say, “Look, the opening has to be minuscule.” You wouldn’t believe what a rat can fit through. So looking through that and extrapolating it, the rats are the coolest part, but all sorts of other bugs and some very serious problems, things like mosquitoes and termites and other things like that, our research is ongoing, but it was really eye-opening.
Matt Luneburg: So, we’ll attend relevant events. In this instance, when we were working on Rentokil I went to—I guess you would call it the Super Bowl of pest control—which is an annual conference that’s held in a variety of places across the U.S.
But it’s a great event. These events exist across business spaces, and they give us a chance to interface with, in this case, a variety of participants across the whole industry supply chain from chemical manufacturers to niche technology providers, to bankers, to the industry which we didn’t touch on, but M&A is a meaningful part of the growth that these companies are experiencing because of the route-density dynamics that Mike talked about before, to even smaller owner operators in the industry and technicians.
I think at that particular conference, I actually even wound up taking some courses, some of which might count towards a certification as a pest management professional. So if this whole investing thing doesn’t work out, at least I’ve got that going for me. If anyone listening needs to figure out how to get mice out of their food-service kitchen, give me a call. I think Kevin can probably relay you my contact details, I charge hourly.
But we’ll attend relevant events. We’ll try to speak with a range of industry experts. In this case, it involves, like I mentioned, technicians, branch managers. We’ll speak to competitors, former employees, bankers, we’ll even talk to entomologists about the nitty-gritty of how various pest problems are evolving to the extent that they’re relevant and impact industry growth.
But I think the key point to note there is that it’s not done in isolation. It’s not me flying around by myself formulating an opinion on the industry and Rentokil. And then trying to tie up an investment case with a nice bow and presenting it in front of the portfolio management teams. In many cases and, in this case, Mike and others across the investment team are actually going with me to these events. They’re going with me to management meetings, which in this case is very important because as we talked about before, this is ultimately a people business. It’s about managing people and optimizing their performance at work.
So understanding that the company has a culture that can scale effectively and that they can manage the risks associated with that is super important. So having a portfolio manager like Mike in the room, when we’re meeting with the CEO and the CFO, and trying to understand what makes the business tick is really important to building that shared context. And then frequently—the other thing I noticed—our work at Sands involves multiple people and teams. I’m not just working in isolation; I’m talking with other analysts who have done work on similar businesses. In this case, it was very much like that, where we have folks who had done work in peripheral business spaces that were very much relevant to a scale-driven, route-density model like Rentokil. So being able to leverage their experience and their insights to get to an actionable conclusion here is really helpful.
Kevin: Interesting. So it’s clear that we can draw on past experiences—pattern recognition, as we like to call it—find businesses that may not be right there in kind of those key sectors that people would think we would invest in, but still find really great innovative businesses that might be growing for some of the same reasons those innovative, or really the high-tech, businesses do, but in different categories.
So, Mike, as a co-portfolio manager on the Global Leaders strategy, does the way you think about a company like Rentokil vary in any way from how you might be treating other companies, tech businesses, life sciences, as I was saying, because that’s kind of what we’re best known for is that innovation, so do you put it in a separate category? Tell us how that fits into your thinking around portfolio construction.
Michael Raab: Yeah, I think the first thing I do is maybe push back a little bit on just the question to an extent. Some people may know us more for life sciences and tech, some of the innovative companies there, but our core competency is much broader than that. And over the last 30 years, we have invested in companies that span a much wider spectrum than those two industries. In growth investing, I think there’s often this maniacal focus on innovation, but you know what’s even cooler than innovation? It’s a business that doesn’t have to innovate—its competitive moat is so deep that it can just do what it does because no one can get across that moat. And I think what you see is innovation doesn’t always lead to wealth creation. Okay, it’s only the types of innovation that build a moat. And when you look at Rentokil, there’s certainly some innovation going on there, but the magic of it is the industry nature of basically building that scale and that density that you build this massive moat around yourself because of those route-density dynamics, and you have this huge duration to your growth at that point going forward.
So innovation is certainly a big part of our process, but we do think of the portfolio as really having two different types of businesses. They’re not mutually exclusive, but there’s these innovative disruptors. And then there’s these businesses that are selling needs, not wants, to their customers. Rentokil clearly falls more in the needs versus wants for its customers, but there is some innovation at Rentokil, too. But I don’t highlight it as the main thing.
For example, there’s actual software that is used to give the directions to the drivers. So say you need to make 10 stops today. What order do you do it in? And what time of day? When do you start? When do you end? And how do you drive there? What are the directions? And that can be very different on a Thursday or a Monday. Maybe there’s a sporting event in town on Wednesday, that changes things. So just squeezing out one or two more stops over the course of a week, multiplied by a thousand technicians is a really, really big deal. And there’s stuff like that going on all the time. And there’s little things on the margin that we have seen, so a rodent trap that has a sensor in it that says there’s a rodent in here. Or there isn’t. So if there isn’t one in there, then the technician doesn’t have to go in and just look in the trap and then just leave. So you get these alerts to better manage your day to squeeze more efficiency out of all of your people. So it doesn’t get a lot of fanfare, but it is very real and is out there in the market. And Rentokil is certainly one of the leaders on that front.
But your other question was how does it fit into our portfolio construction? I’d remind listeners that the Global Leaders portfolio has this dual mandate where we are working on the efficiency of return, meaning it’s a growth portfolio, but we’re also managing volatility at the same time.
So you get the volatility profile of a more core portfolio, but you get the growth dynamic that’s in there. And the main way we are able to do that through portfolio construction is by focusing on a diversity of growth drivers in our businesses. So what you have is when one business may not be working, the rest of the portfolio is firing on all cylinders. So we’re not all correlated to the same trend. So, in a portfolio, we can have stuff like pest control. We can have software, we can have internet-based companies, but we also have childcare, aerospace, global payment networks, cable broadband businesses. So when you mix that up, what you get is the entirety of the portfolio becomes much less correlated and much less volatile than you would get if we were exposed to say a single factor or maybe two attractive ones. But what we do is we mix things up so something like pest control fits in quite nicely because it doesn’t have a lot to do with the rest of the portfolio. It’s doing its own thing. And it fits in the bucket, whether the core of the portfolio is 50 percent to 60 percent in cash compounders, duration growers, like a Rentokil that’s the bulk of the portfolio. So it fits squarely down the middle in Global Leaders’ portfolio construction.
Kevin: Great. That’s a good insight into how the process works. Let’s drill down a little more on the company, switching back over to the specifics of the business. You started covering this business years ago, pre-pandemic. Has things changed for the business, the growth trajectory? Talk about maybe how it’s evolved over the last couple of years and what’s next for the company.
Matt Luneburg: Yeah. It’s been interesting to watch how this has played out. Rentokil in particular, relative to some of the other large pest-control companies, has a large commercial footprint. So doing work for, whether it’s businesses like ours and the business services space, or companies in FMCG—fast-moving consumer goods—and the food supply chain, their work runs the gamut. Restaurants and leisure companies, all of those businesses, when everyone left the office were impacted, early on in the pandemic. So that part of the business hit a temporary air pocket. But it was more than made up for by another part of the company’s portfolio, which is, we haven’t talked about this explicitly, but they have a hygiene business as well, where historically they’ve provided services to washrooms on commercial premises.
So think soap dispensers, towel machines, and sanitary services. That sort of work. What they were able to do amidst the pandemic was pivot some of those resources towards office disinfections, which more than offset the headwinds that they were seeing on the commercial side of the business. And, while that commercial headwind was certainly tough in a short period early on in the pandemic, what was interesting to see was—with people nesting and spending more time at their home—the residential business really started taking off. Folks who hadn’t considered pest control before—because they weren’t at their home enough to realize they had an ant problem or a cockroach problem—were all of a sudden confronting these things every single day in their home office or around their kitchen table. So it created an incremental tailwind for that residential side of the business that we think is likely to persist as we exit the pandemic.
And then on the hygiene side of the business, the pandemic really catalyzed on a global basis, much more focus around proper health and hygiene standards for businesses in any sector. And so the hygiene part of Rentokil’s business has really seen a step change in demand related to those services. Historically, that business has been a GDP-type grower, but as a result of the pandemic, we’re exiting with the organic growth prospects of that hygiene part of their portfolio increasing by 50 percent to 100 percent, when we think about a normalized growth rate.
And, in addition to that, they’re innovating in order to participate in other areas of hygiene. So, whereas their business has historically been focused mostly on the washroom, as I mentioned, they’re doing more with air purification, and they’re expanding into relevant adjacencies that can give them opportunities within that industry to expand their footprint. Those are some of the changes.
The other thing that we’ve seen, of course, is there’s a component of their growth that’s related to M&A, and with all of the uncertainty brought upon by the last few years, we’ve seen some really interesting tactical areas for inorganic growth.
But Terminix, which is one of the largest pest-control operators in the U.S. ultimately elected to sell itself to Rentokil. That deal has not closed yet, to be clear. But if and when it does, and our research indicates that it will likely close successfully, it will be a massive deal for Rentokil’s business in the U.S. in that it’ll basically catapult Rentokil into the lead in terms of market share and greatly improve their route density in a number of markets where they were either underrepresented historically or weren’t present at all.
So we see a number of synergies that are very powerful related to that transaction, and it will give Rentokil an opportunity to use its what we believe to be best-in-class human resources and personnel management routing competencies in order to accelerate the organic growth rate that the Terminix has experienced historically.
So they’ve been impacted by the pandemic in a number of ways. And on balance, they’ve been very positive for the business, not just in the near term, but in the long term, in terms of enhancing the growth profile of the enterprise.
Kevin: Excellent. In the interest of keeping this shorter, we covered a lot of ground here today, so thanks for that. I know I learned a lot about the pest-control industry and Rentokil specifically, and I hope people listening learned a little bit more about how we operate and how we’re not just looking for our keys under the streetlamp. We’re going beyond the obvious sectors and obvious spaces and finding some really interesting ideas of which Rentokil, I think, is a perfect example.
But if you’ve listened to the podcast before, for those who have, you know that we like to end with a look into our presenters and getting to know the people that have been talking to you for the last couple of minutes. We also on this podcast, occasionally, I like to let listeners in on little-known secrets at Sands Capital. Mike, I don’t think people know this, but you were on the U.S. national swim team in the early 2000s. How do you think that experience helped you in your role now?
Michael Raab: You know, it’s something that I need to be reminded of every now and then. But yeah, swimming just dominated the early part of my life. Back in the early 2000s, I qualified for several U.S. teams, world champs, Pan American Games, swam in college on a scholarship, NCAA, all of that.
One of the highlights in my career, I think, is when we talk about a moment that you can take that you think is really influencing your professional life and the rest of your life, I would say it comes in 2004 when I actually just missed making the Olympic team. So if you know how swimming works, the top two finishers in each event at the Olympic trials make the team. No exceptions. Top two that day. So I got third. And so Michael Phelps was first, the guy who won the Olympics in 2000 was second, and I was three-tenths behind him.
What always bothers me [is that] in track and field, they take three people, but oh well, swimming is only two. It was an amazing accomplishment. It’s not like I was expected to make it, and I didn’t. I mean, third place. It was a fantastic race, but it was absolutely devastating at the same time. And really for the 10 prior years I used to dream of making the Olympics and training all the time. And then you reach a point where it’s not just this dream. You could actually do it. A reasonable dream.
And that was reasonable for me for probably the three years prior to that Olympic trials. So it was just consuming and then not to make it, it’s almost like a “What’s next?” The biggest lesson is learning how to fail really, to lose, and how to handle that. You learn so much more from that than you do when you win. And there’s so many parallels to investing on your mistakes, what you take away from that and the resiliency that you can gain.
And I look for that in other people, too, when people interview, I ask everybody about a time that they failed and what they’ve learned. This is going to be a really, really tough business if you’re a sensitive soul and haven’t had some of those ups and downs. So I am just really grateful to have that type of experience. And I think it allows me to have that perspective on the job and have a lot of empathy for folks when they’re going through those tough times. And it’s really important in our culture to be supportive of each other.
Kevin: That’s really interesting. You and I, years ago, were with a team in Sao Paulo, Brazil, on the rooftop bar of the hotel, and there was a swimming pool there, and we were encouraging you to swim a lap in the pool. How close were you to actually doing that?
Michael Raab: Well, I didn’t have my equipment. But if I’d had it, I think it would’ve been likely.
Kevin: This was 10 o’clock at night. The bar was packed. So yeah, high likelihood of being kicked out at that point.
So, Matt, you cover a range of businesses but now mainly focus on consumer businesses. How did you become an investor in this space?
Matt Luneburg: Yeah, so, Kevin, as you mentioned, I’m on the consumer team, but my role’s a little bit broader than that and maybe what the org chart would suggest. I actually cover a variety of different businesses, so everything from traditional consumer, which spans retail, FMCG, etc. Some ecommerce, some business services as we discussed today, even software, some telecom, and education and ed tech. So I look at a variety of business spaces and historically I also spent a lot of time in the industrials world. I think both Kevin and Mike, remember my days as an energy analyst, where I spent about a decade focused on the energy sector broadly.
Kevin: I don’t think many people know that you went from energy to energy drinks consumer.
Matt Luneburg: Exactly. The second, which is a much, much better business model. It was a fascinating space to cover just a combination of science, geopolitics, technology, full of colorful characters, as I’m sure you can imagine.
And I’m grateful for the time that I spent covering the energy space because it was formative, and I think incredibly valuable for me developing into a stronger analyst. A few key lessons that I took away from that experience. The first would be that analysis needs to be fluid and change along with the facts and reality. You can’t anchor, your views need to evolve as the world evolves. Some of the biggest mistakes I made in those days were failing to keep pace with change. You’ve got to trust your instincts as an analyst, when it feels like something is changing, and you really need to dig in and be willing to challenge established viewpoints, including your own.
I think there’s a point about the importance of independent thinking. Most analysts and investors tend to anchor as well. Management teams are usually the last people to recognize, or at least, acknowledge that the ground beneath their feet is shifting. So you need to hear these different viewpoints, but you also really need to be doing rigorous work of your own, which we do at Sands. And if it points to a different conclusion that’s ultimately where the buck has to stop as it relates to decision-making.
So I think that’s a really important point that I took with me on my journey from energy through a variety of these different business spaces. And I think, ultimately, my career journey through those different business spaces, originating from energy has made me a much more effective analyst as a result.
Michael Raab: I think Matt’s making some really good points here. And, at Sands, when you get started as an analyst, you have to start somewhere. And, typically, you’ll do that in some industry or sector. But really, as you grow as an investor you want to really have a generalist mindset, that’s something that’s very important at Sands. All of our PMs have it, our senior analysts have it.
And what you see in that journey is not different things. You see how much is the same, the concepts of leadership and competitive advantage transcend sectors and industry. And I think while it may seem like a funny journey to go from energy to pest control, it really isn’t in the grand scheme of thinking of yourself as an investor.
And my personal view is our sector organization is more of a people-organization thing than it is some sort of “you have to have this deep expertise in this sector” and that necessarily perfectly transcends the better investment results. You certainly want to have that expertise. We think of it more as we have it among teams as opposed to just this specific individual forever and always. We’re building people up to be able to see things and not have blinders on and have that tunnel vision within just say one sector or industry. I think that’s one of the biggest takeaways.
Kevin: Excellent, great. Well, that was enjoyable. I hope you guys had a good time doing this as well. And again, like I said, I hope people listening learned something about the business, about the firm and about the two folks on the call with me today.
Matt, Mike, thank you very much for your time. Again, like I said, we hope you enjoyed learning about Rentokil with us. And we hope you all will join us for our next episode of What Matters Most.
1 Orkin is owned by Rollins, which is not owned in any Sands Capital strategy. Terminix is not currently owned in any Sands Capital strategy. Steritech and Ehrlich are both Rentokil brands.
2 Source: https://www.un.org/development/desa/en/news/population/2018-revision-of-world-urbanization-prospects.html
The views expressed are the opinion of Sands Capital and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed are current as of April 1st, 2022, and are subject to change. This material may contain forward-looking statements, which are subject to uncertainties outside of Sands Capital’s control. The securities identified do not represent all of the securities purchased or recommended for advisory clients. There is no assurance that any securities discussed will remain in the portfolio. You should not assume that any investment is or will be profitable. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. For more information, including a full list of portfolio holdings, please visit our website at www.sandscapital.com.
The featured podcast portfolio companies represent a subset of Sands Capital holdings that illustrate the types of businesses in which we typically invest. The series uses rotation whereby podcasts are selected to highlight different sectors and geographies.
The views expressed are the opinion of Sands Capital and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed were current as of the date indicated and are subject to change. This material may contain forward-looking statements, which are subject to uncertainty and contingencies outside of Sands Capital’s control. Readers should not place undue reliance upon these forward-looking statements. There is no guarantee that Sands Capital will meet its stated goals. All investments are subject to market risk, including the possible loss of principal. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. Forward earnings projections are not predictors of stock price or investment performance, and do not represent past performance. References to companies provided for illustrative purposes only. The portfolio companies identified do not represent all of the securities purchased or recommended for advisory clients. There is no assurance that any securities discussed will remain in the portfolio or that securities sold have not been repurchased. You should not assume that any investment is or will be profitable. GIPS® Reports and additional disclosures for the related composites may be found in the Sands Capital GIPS Report.
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Sands Capital is an active, long-term investor in leading innovative growth businesses, globally. Our approach combines analytical rigor and creative thinking to identify high-quality growth businesses that are creating the future. Through an integrated investment platform spanning venture capital, growth equity and public equity, we provide growth capital solutions to institutions and fund sponsors in more than 40 countries.
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