They say that there are two things that can survive a nuclear apocalypse: cockroaches and Twinkies. But if I had to put money on either of the two, I’m going all in on the cockroach.
Why?
Well, here are five good reasons:
1) They are ancient
Cockroaches are believed to have originated more than 280 million years ago, in the Carboniferous era
2) They are survivors
Cockroaches can live without food for an entire month, and can survive up to a week without water
3) They are incredibly fast
Cockroaches can run up to three miles in an hour, which you’ve probably figured out if you’ve ever tried to stomp one
4) They grow up fast
Some species of cockroaches can become adults in as little as 36 days
5) They are badass
A cockroach can live for a week without its head. They breathe through tiny holes in their bodies, so they do not need their mouths or heads to breathe
They are basically the most adaptable creatures on Earth — and also one of the most hated. In fact, insects and bugs rank as the public’s third most common fear, behind public speaking and heights.
That means that people will do just about whatever it takes — and pay whatever it costs — to rid their homes and their lives of them.
When renters and homeowners were asked about the major problems they’ve had with their homes, the number one problem they cited was insects. When you have roaches crawling around in your house, it becomes a priority. People simply don’t allow their houses to be overrun with creepy crawlies. This has led to a billion-dollar pest control industry that is steady regardless of what the stock market and the economy are doing.
Since we’re facing what could be a massive disaster in the stock market by the end of the year, let’s take a page from the cockroach and look at a company that has the fortitude to survive through any type of stock market crash.
Bugging Out
Pest control is big business…
Pest infestations led to an increase of $6.8 billion in the operating costs for U.S. businesses last year, and an overall loss of $13.2 billion in revenue. Yes, I said billion. This includes maintenance, repairs, and total equipment replacement. This doesn’t account for the majority of businesses that claimed pests damaged their reputation and cost them a fortune in customer compensation payouts and fines.
All told, $7.213 billion was billed out for pest control services in 2013 in the U.S. alone. And we’re not just talking about cockroaches.
Termites cause over $5 billion in damages annually.
Bedbugs have evolved from a rare nuisance to a worldwide epidemic. The money spent on destroying them has doubled from 2006 to 2011 and doesn’t show any sign of slowing down.
These horrific creatures are known affectionately as “a drop of blood with legs.”
These miniature monsters have been around for about 250,000 years. They have been terrorizing humans for at least 10,000 years — archaeologists have discovered bedbug fossils in Egyptian dwellings dating back 3,550 years and Roman philosopher Pliny wrote about bedbugs way back in 77 AD.
Bedbugs are so ingrained into our current collective psyche that they’ve even burrowed their way into children’s bedtimes routines.
“Good night, sleep tight, don’t let the bedbugs bite…”
(For the record, I have never uttered this to my kids before bed, since it is such a nightmarish thought. I can still remember the first time my mom told me that terrifying poem before bed, and I couldn’t sleep for a week.)
In any case, the point is that when you have bedbugs, you are going to pay to get rid of them — and pay handsomely. They are very hard to kill — these pesky parasites are known to survive up to a year on one single feeding, and they can withstand temperatures from freezing to 122 degrees Fahrenheit.
The New York Times estimates that it costs an average of $5,000 or more for inspection costs, exterminator fees, cleaning, and storage. Landlords of large apartment buildings have been known to spend as much as $80,000 to exterminate these blood suckers.
The problem is also getting worse, and one in five Americans have reported having a bedbug infestation or know someone who has encountered bedbugs at home or in a hotel.
“Pest control companies specializing in bedbugs are making a lot of money,” according to Larry Pinto, author of the Bedbug Handbook and a pest control consultant.
So, which company kills the most bedbugs, termites, and cockroaches, and therefore makes the most money?
Enter the Orkin Man…
Kill Bugs Dead
Orkin is the biggest name in pest control. I’m sure you’ve seen their hilarious commercials, witnessed their large trucks drive by, or even watched one of their popular “At Home with the Orkin Man” educational videos.
In fact, the Orkin Man is so pervasive that he even has his own Halloween costume.
Orkin is owned by parent company Rollins, Inc. (NYSE: ROL), which also holds a stable of other of businesses that provide pest and termite control services to residential and commercial customers, including hotels, food service establishments, and food manufacturers.
While it is huge in the U.S., it has also wielded its bug-killing magic in Canada, Central America, the Caribbean, the Middle East, Asia, the Mediterranean, Europe, Africa, and Mexico.
Since Rollins is the leader in killing pests, its stock has been completely immune to any market forces. It is up 369% in the past decade. In 2008, when everything went to hell in a handbasket and the S&P dropped 38%, Rollins hung tight and only dropped a meager 4%.
It’s gone on to 223.4% gains since then:
That’s a better return than Apple (NYSE: AAPL), without any of the volatility.
Rollins is well positioned to survive and prosper through our next market correction as well. It just posted a record second quarter:
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Second quarter revenues of $392.2 million rose 6.2% over last year, and 5.9% for the first six months of 2015
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Net income increased 10.3% in the second quarter and 13.1% for the first six months of 2015
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It has improved earnings per share by 12.5% in the second quarter compared to last year, and has been growing for the last three years.
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Its bedbug business had increased 18.5% in revenue growth, blowing away the industry average of 7.3%
It holds no debt, and has well over $100 million in cash on hand. It also has a history of raising its dividend payouts — which currently sit at a modest, yet sustainable, 1.16% yield.
Basically, the company keeps getting stronger and I expect it to continue.
I would comfortably say that it’s a great stock to buy on dips and hold forever. It will be killing pests until the end of time and will do so regardless of the stock market or economy. So the next time a market apocalypse comes to destroy your portfolio, remember Rollins (NYSE: ROL).
It’s clearly learned a lot from cockroaches…
Godspeed,
Jimmy Mengel
Editor, Outsider Club
Jimmy is a managing editor for Outsider Club and the Investment Director of the personal finance advisory The Crow’s Nest. You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he’s brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor’s page.
