Weekly Brief #44
Analysis on the newest stock to my watchlist... Google and Apple’s ~$17 billion EU fine, Apple September event summary, PayPal partners with Shopify, Trump-Harris presidential debate.
Good morning investors 👋,
Happy Friday and welcome, or welcome back, to the 44th Weekly Brief.
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Let’s get into it.
In this issue:
🪳 Meet, Rollins… the bug company
💰 Google and Apple’s ~$17 billion EU fine
🇺🇸 Trump-Harris presidential debate
FEATURED STORY
🪳 Meet, Rollins… the bug company.
Do you like bugs? Not many humans do as a general rule. For me, though, it kind of depends. I was actually just recently talking with my brother about bee farming. Turns out, you can literally order a few pounds of bees in the mail (with a queen), and overall, including all the necessary equipment, it would cost around $1,500 to start a hive that produces 70 lbs of honey every year (which is about $890-950 per year in honey revenue). Keep in mind, it’s also a very lucrative business model. Because as the first fiscal year of your bee business ends, there’s basically no overhead since you already have the necessary equipment to produce product.
So, on one hand, I find bugs amazing. I like honey. I like tea. These things are products of the work of bugs, among many other things. However, then there are insects like bed bugs and cockroaches and termites… pests. Pests that provide no value at all besides sucking the quality of your life.
The good news? These little pests are financing a billion-dollar industry, largely controlled by a company you may or may not have heard of before — a company with amazing fundamentals. A company that’s become the newest addition to my already packed watchlist (and maybe soon, my portfolio).
Say hello to Rollins
Rollins or Rollins Inc, is a pest control service company. They provide management and elimination services for those aforementioned pests. Whether it be insects, rodents, or termites, Rollins has technicians that will solve the problem. (Something to note, is that while also being listed on the stock market, Rollins is almost 60% controlled by the Rollins family.)
Rollins revenue is broken down as follows:
Residential Pest Control: 73.3%
Pest control services to individual homeowners and renters.
Commercial Pest Control: 22.3%
Pest control services to businesses, industrial facilities, hostpitals, schools and other commercial clientele.
Termite and Specialty Services: 4.4%
Exactly as the name suggests, this segment includes services specifically related to termite control and specialized pest management like bed bugs.
Schools that have a mice infestation, hotel rooms with bed bugs, houses that get termites — whatever it may be, if it’s about removing pests, Rollins is the answer to solve your problem. What I particularly like about Rollins is that it’s not a very hard business to understand. There’s no special supply chain, no special software, nothing complicated about it. They sell services to get rid of pests.
I believe the simplicity and long-lasting nature of such a business is precisely why the company is so fundamentally amazing.
Fundamentally amazing
Rollins has consistently grown its revenue year over year since 1998 without missing a beat. Not just the revenue, but, and I’m not joking here, every single financial aspect of the company has grown year after year since that same time frame. Free cash flow, EBITDA, earnings, EPS — all of it.
Obviously, I’m not saying Rollins is the only company that has done this. Costco is a great example. But I just personally never would have guessed a pest company to rival that of Costco in terms of predictability.
Here are some of Rollins metrics over the past 10 years:
Stock CAGR of 18.81%.
ROCE of 35% (average)
Annual revenue growth: 8.68%
Annual earnings growth: 13.43%
(13.54% on a per-share basis)
Annual FCF growth: 13.16%
(13.23% on a per-share basis)
Dividend increased: 400%
Shares outstanding: decreased by 0.4%
All of these metrics are not just the average of the past 10 years, but they were literally the exact same percentage growth, or close to it, every year over the past 10 years. It’s an insanely predictable company, and like most predictable companies (e.g., Costco), the market prices them accordingly. Rollins currently trades at a 42.19 forward P/E at the time of writing.
FINANCE
💰 Google and Apple’s ~$17 billion EU fine
Apple: The European Union’s top court ruled against Apple this Tuesday, ordering the company to pay Ireland up to a whopping €13 billion ($14.4 billion) in back taxes. This marks the second time Europe has singled-out Apple this year alone following accusations of violating EU competition laws in March (In all, the EU has “fined” Apple over ~$16.4 billion, around 16% of Apple’s current FCF).
The case dates back to 2016, when the European Commission (EC) ordered Apple to repay unpaid taxes, claiming Ireland had given the company illegal tax benefits where Apple paid less than 1% some years. For comparison, the corporate tax rate in Canada is 26%.
Google: But guess what, on the same day, Google also lost money! In the same court ruling, Alphabet (Google’s parent company) lost its appeal against a 2.42 billion euro ($2.7 billion) fine imposed by EU antitrust regulators in 2017 for using its shopping service to ‘unfairly disadvantage smaller rivals.’ I didn’t even know Google had a shopping service. Turns out, I was right, because Google shopping is just ads for retail.
“While dominance isn’t illegal, exploiting it to harm competition is prohibited.” — The Court of Justice of the European Union
Google has so far accumulated over $9.1 billion in EU antitrust fines and is still challenging rulings related to Android, AdSense, and its adtech business.
BUSINESS
📱 Apple September event summary
Speaking of Apple… this Monday it announced the iPhone 16, with a different camera orientation new gorgeous updated design.
Some other updates and announcements included the Apple Watch 10, AirPods 4, and iPhone 16 Pro, along with awesome features like sleep apnea detection and hearing aid mode for the Apple Watch and AirPods Pro 2 (as well as new and improved colours for the AirPods Max and a matte black Apple Watch Ultra 2).
I’ll be upgrading, but only because I’m using an iPhone XR. I’d say unless you really want the new Apple Intelligence features, or you have a phone older than 3 years, you shouldn’t even consider upgrading. (I might even buy last years model to save even more money.)
🤝 PayPal partners with Shopify
PayPal this week announced it’s expanding its partnership with Shopify to become an additional online credit/debit processor for Shopify Payments in the U.S. Now, PayPal wallet transactions will be integrated into Shopify Payments, helping to streamline orders, payouts, and reporting.
PayPal helped Shopify roll out Shopify Payments in France a few years back, and currently, Shopify is the fourth-largest payment processor in the world by volume, behind Square, Stripe, and PayPal.
POLITICS
🇺🇸 Trump-Harris presidential debate
Donald Trump and Kamala Harris met for the first time on the debate stage in Philadelphia this Thursday for the second and final scheduled presidential debate before the presidential election in November. Over 90 painful minutes, Harris and Trump mocked each other and laughed at each other. (There’s your summary, I highly encourage you to not watch it.)
A snap CNN poll after the debate showed Harris performed better and by a pretty wide margin as well — 63% to 37%.
According to the BBC, Harris used a tactic where she ‘purposely attacked Trump and goaded him into defending himself instead of focusing on the actual issues brought up in the debate.’ Even if this supposed strategy didn’t work, she still won the debate at the end of it all. Harris is leading Trump 48.7% to 46.8% in the national polls at the time of writing.
📚 Book of the Week
Note: I don’t recommend books that I haven’t read or that I would never read. The books I recommend are books I have already read or that I will eventually read.
Nexus — Yuval Noah Harari
Book Description:
For the last 100,000 years, we Sapiens have accumulated enormous power. But despite all our discoveries, inventions, and conquests, we now find ourselves in an existential crisis. The world is on the verge of ecological collapse. Misinformation abounds. And we are rushing headlong into the age of AI — a new information network that threatens to annihilate us. For all that we have accomplished, why are we so self-destructive?
Nexus looks through the long lens of human history to consider how the flow of information has shaped us and our world. Taking us from the Stone Age, through the canonization of the Bible, early modern witch hunts, Stalinism, Nazism, and the resurgence of populism today, Yuval Noah Harari asks us to consider the complex relationship between information and truth, bureaucracy and mythology, wisdom and power. He explores how different societies and political systems throughout history have wielded information to achieve their goals, for good and ill. And he addresses the urgent choices we face as non-human intelligence threatens our very existence.
Information is not the raw material of truth, nor is it a mere weapon. Nexus explores the hopeful middle ground between these extremes, and in doing so, rediscovers our shared humanity.
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Thank you for reading today’s Weekly Brief! If you enjoyed or learned anything, please spread the word. Remember, none of this is financial advice, please do your own research.
— Jacob
Mike Heroux just reviewed Rollins this past week at Dividendstocksrock for his exclusive members…