ServiceMaster Global Holdings
Thesis
ServiceMaster is a complex company with three market-leading businesses: Terminix, American Home Shield, and a franchise business. The stock price has fallen from over $40 to $32 due to market misunderstanding and concerns about Terminix's growth, which we believe are unfounded. The underlying businesses are high-quality with strong competitive advantages and growth potential, making this an attractive investment opportunity.
Did it work?
The long thesis argued the ~20% drop from $40+ to $32 reflected unfounded market misunderstanding of high-quality businesses, but the stock subsequently collapsed 84.3% over 28 months. A decline of that magnitude decisively invalidates the claim that the concerns about Terminix's growth were unfounded and that the underlying franchises would drive value. The market's skepticism was overwhelmingly vindicated rather than being a mispricing.