Terrier Investing
Long only, value, hedge fund manager

ADT: Time To Eat Your Shorts

1. Company and Industry Overview

ADT is the leader in the home security market. Servicing ~6.5M residential and SMB customers, ADT holds over 25% market share in residential and 13% in small business. The market is extremely fragmented. On the residential side, the next-largest competitors, Vivint and Monitronics, hold about 4% of the market each; 59% of the market is held by much smaller operations, which typically outsource monitoring.

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Source: ADT Investor Presentation, November/December 2013

The industry is particularly stable; several sources confirm the overall market expanded at a 4-5% CAGR during the 2006-2012 time frame - despite the financial crisis! The market's key drivers are household/business formation, as well as increased penetration; the latter of...

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