HEI/PCP/TDG Thoughts?

[Guest notorious546]

Out of the three companies below which do you think has the strongest moat and why?

 

Heico (HEI)

Precision Cast Parts (PCP)

Transdigm (TDG)

 

Here's some relative performance graphs.

 

https://www.google.ca/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1432168143648&chddm=98532&chls=IntervalBasedLine&cmpto=NYSE:PCP;NYSE:TDG&cmptdms=0;0&q=NYSE:HEI&ntsp=1&ei=myZdVeDRBOKrjAKe_YGYCw

[Liberty]

TDG, because of all the proprietary sole-source aftermarket content they have.

 

A good proxy for that is just to look at the margins of the 3 companies you list. TDG has made a bunch of acquisitions that have depressed its EBITDA margins a bit recently, but on a steady state they would be in the mid to high 40s. If they didn't have a moat, those margins would no doubt get eroded by competition.

[Gamecock-YT]

The one thing that's interesting to me coming from an aviation background is the talk of an aircraft bubble forming with narrow-body aircraft. You get any type of recession/oil shock and suddenly airlines are dumping aircraft in the desert, no longer performing C and D checks, and maybe scrapping planes for parts. Just my 30,000 ft view. I've followed TDG, watched most of the presentations/investor days, but too big a pond for me to fish in.

[fjm222]

Gamecock- is there precedent of airlines doing this in the past?

[Gamecock-YT]

Every recession there's ever been. The first thing that airlines do is cut capacity.

 

http://www.wsj.com/articles/SB124027676645937525

 

 

[Liberty]

Every recession there's ever been. The first thing that airlines do is cut capacity.

 

http://www.wsj.com/articles/SB124027676645937525

 

And you can look at how TDG performed during those, including the biggest hits to RPM (revenue-passenger-miles) in recent memory, 2001 and 2008-2009.