2 days ago 2

Do You Think Rentokil Initial plc (RTO) is a Low Volatility Stock?

Soumya Eswaran

Thu, Apr 17, 2025, 5:31 AM 3 min read

Oakmark Funds, advised by Harris Associates, released its “Oakmark International Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. For the quarter ended March 31, 2025, the fund's Investor Share Class returned 7.88% compared to the MSCI World ex USA Index’s 6.20% return. Since its inception, the fund returned 8.37% compared to a 6.07% return for the index. Financials and health care sector contributed to the fund’s performance in the quarter, while communication services and information technology detracted. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, Oakmark International Fund highlighted stocks such as Rentokil Initial plc (NYSE:RTO). Rentokil Initial plc (NYSE:RTO) is a route-based services provider. The one-month return of Rentokil Initial plc (NYSE:RTO) was -1.40%, and its shares lost 22.69% of their value over the last 52 weeks. On April 16, 2025, Rentokil Initial plc (NYSE:RTO) stock closed at $21.84 per share with a market capitalization of $11.064 billion.

Oakmark International Fund stated the following regarding Rentokil Initial plc (NYSE:RTO) in its Q1 2025 investor letter:

"Rentokil Initial plc (NYSE:RTO) is the largest pest control company globally. We think pest control is a good business that grows GDP plus with low volatility, earns at tractive margins, and has low capital intensity with strong cash flow generation. As a market leader, Rentokil additionally benefits from scale ad vantages that drive lower procurement and customer acquisition costs, and greater customer monetization, thanks to the breadth of products and ser vices the company can offer at a premium price. Due to industry fragmentation, Rentokil also has a strong pipeline of acquisitions with attractive eco nomics. While most of Rentokil’s mergers and acquisitions are bolt-ons, they have occasionally done large deals. Their most recent large deal, the acquisition of Terminix, has gone poorly to-date and resulted in a share price decline in excess of the deal value. While Terminix’s integration will take several quarters to complete, we believe they will ultimately succeed and that the resulting business will be a stronger and more profitable one that can deliver growth in line with the industry's average. This should drive a re-rating in the shares towards peer and private market multiples. We believe the market has overly discounted the business’s future prospects."