stahleyp Posted March 16, 2013 Share Posted March 16, 2013 I'm surprised this hasn't been posted, with the popularity of Outsiders, so I decided to start a thread. Thorndike (the author) brings up the company on page 34. TDG is a components manufacturer. He says that it has grown cash flow at a compound rate of over 25% since 1993 and is similar to Capital Cities back in the day. He goes on to say that they company has a nice moat due to how their parts are engineered into military and commercial aircraft. It also has decent insider ownership. I have virtually no experience in this sector so I wanted to throw the idea out there! Link to comment Share on other sites More sharing options...
Guest wellmont Posted March 16, 2013 Share Posted March 16, 2013 this one is on my buy in a bear market list... Link to comment Share on other sites More sharing options...
stahleyp Posted March 16, 2013 Author Share Posted March 16, 2013 Yeah, wellmont, I was thinking about that too. It's certainly not cheap right now. Link to comment Share on other sites More sharing options...
rogermunibond Posted March 16, 2013 Share Posted March 16, 2013 It's essentially a rollup compny of avionics, aviation, and tech parts manufcturers. I looked at it shortly after their ipo in 2007 and passed :(. They weren't cheap then either, and based on there moat and fcf I don't think they will get cheap. Alan Fournier of Pennant bought them early on and still holds all the shares. Big winner for them. Warburg Pincus was the sponsor. I've tracked a number of Warburg Pincus companies that have done very well after ipo, so I watch for them now. Don't want to make the same mistake again. Link to comment Share on other sites More sharing options...
giofranchi Posted October 25, 2013 Share Posted October 25, 2013 Recent post by The Brooklyn Investor: http://brooklyninvestor.blogspot.it/2013/10/transdigm-group-tdg.html giofranchi Link to comment Share on other sites More sharing options...
jay21 Posted October 25, 2013 Share Posted October 25, 2013 It's essentially a rollup compny of avionics, aviation, and tech parts manufcturers. I looked at it shortly after their ipo in 2007 and passed :(. They weren't cheap then either, and based on there moat and fcf I don't think they will get cheap. Alan Fournier of Pennant bought them early on and still holds all the shares. Big winner for them. Warburg Pincus was the sponsor. I've tracked a number of Warburg Pincus companies that have done very well after ipo, so I watch for them now. Don't want to make the same mistake again. If you are sure that these guys have a huge moat and will grow earnings or cash flow a share by > 10%, then a 20x multiple can be cheap imo. Link to comment Share on other sites More sharing options...
Liberty Posted November 14, 2013 Share Posted November 14, 2013 http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=1876282&highlight= Link to comment Share on other sites More sharing options...
Cunninghamew Posted November 14, 2013 Share Posted November 14, 2013 Ha.. I was reading about them yesterday. Wally Weitz's shop post brief blurbs on companies every so often that are worth reading. Here is their post on TDG https://weitzinvestments.com/resources/documents/Literature_and_Publications/About/News/Analyst%20Corner.pdf Link to comment Share on other sites More sharing options...
Liberty Posted November 21, 2013 Share Posted November 21, 2013 http://www.beyondproxy.com/tdg/ Link to comment Share on other sites More sharing options...
stahleyp Posted November 21, 2013 Author Share Posted November 21, 2013 ha. I was getting ready to post that too, Liberty. ;) As a side note, it looks like a couple of the tiger funds have a position in it too. Link to comment Share on other sites More sharing options...
giofranchi Posted February 4, 2014 Share Posted February 4, 2014 TransDigm Group Reports Fiscal 2014 First Quarter Results CLEVELAND, Feb. 4, 2014 /PRNewswire/ -- TransDigm Group Incorporated (NYSE: TDG), a leading global designer, producer and supplier of highly engineered aircraft components, today reported results for the first quarter ended December 28, 2013. Highlights for the first quarter include: •Net sales of $529.3 million, up 23.0% from $430.4 million; •EBITDA As Defined of $243.6 million, up 21.2% from $200.9 million; •Net income of $86.1 million, up 16.1% from $74.2 million; •Earnings per share of $1.44, up 118.2% from $0.66; •Adjusted earnings per share of $1.66, up 9.9% from $1.51; and •Upward revision to fiscal 2014 financial guidance. http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=1896533&highlight= Gio Link to comment Share on other sites More sharing options...
Liberty Posted May 6, 2014 Share Posted May 6, 2014 http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=1927287&highlight= Highlights for the second quarter include: Net sales of $590.8 million, up 26.9% from $465.6 million; EBITDA As Defined of $263.0 million, up 19.9% from $219.3 million; Net income of $90.4 million, up 33.0% from $67.9 million; Earnings per share of $1.49, up 19.2% from $1.25; Adjusted earnings per share of $1.87, up 7.5% from $1.74; and Upward revision to fiscal 2014 financial guidance. Presentation : http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjMyOTQ0fENoaWxkSUQ9LTF8VHlwZT0z&t=1 Link to comment Share on other sites More sharing options...
Olmsted Posted May 6, 2014 Share Posted May 6, 2014 Great addition to the board. Thanks for introducing Transdigm for discussion, stahleyp. I've previously looked at Transdigm's strategy and execution. It's basically a publicly-traded buyout shop. They're as good as it gets in aerospace suppliers. A collection of very niche businesses, with a focus on aftermarket sole-source parts (meaning, they can charge whatever price they want). They make random stuff that you never think about it. Like the toilet flush handle in a commercial airliner, or some random gromit on a cockpit door. Crazy margins for a parts supplier. The businesses run more or less independently, but the parent is good at squeezing out some costs with supply chain scale. Very targeted growth. Although it's an acquisition machine, they still achieve decent organic growth. My big concern with an investment here: they have achieved tremendous success in rolling up the "long tail" of niche, sole-source parts suppliers. How much runway does this strategy have left? How many attractive roll-up candidates are still out there? The price reflects continued growth. Link to comment Share on other sites More sharing options...
Olmsted Posted May 6, 2014 Share Posted May 6, 2014 If you are sure that these guys have a huge moat and will grow earnings or cash flow a share by > 10%, then a 20x multiple can be cheap imo. I am sure they have a moat. Less clear on growth. By my reckoning, organic growth has been around 5%. You have to feel comfortable with their ability to continue to find good acquisitions. Link to comment Share on other sites More sharing options...
Olmsted Posted May 6, 2014 Share Posted May 6, 2014 this one is on my buy in a bear market list... Agreed. A great watch-list candidate. Link to comment Share on other sites More sharing options...
Liberty Posted May 6, 2014 Share Posted May 6, 2014 My big concern with an investment here: they have achieved tremendous success in rolling up the "long tail" of niche, sole-source parts suppliers. How much runway does this strategy have left? How many attractive roll-up candidates are still out there? The price reflects continued growth. I think they have a huge M&A runway. The industry is gigantic if you take into account both the commercial and defense side. They barely have started buying businesses HQ'ed outside of the US (they have 4 businesses in Europe, but I think 3 came with other businesses, only one - the most recent EME acquisition - was directly acquired in Germany). In many of their investor day presentations they have slides that show how many potential acquisitions targets they estimate are out there (and what proportion is of what revenue size and EBITDA margins). Looks like a huge fishing pond. Maybe it'll become a problem in 10-15 years, I don't know, but I don't see it for the foreseeable future... Link to comment Share on other sites More sharing options...
siddharth18 Posted May 7, 2014 Share Posted May 7, 2014 Amazing company really. They not only manufacture their parts, but also invent them and hold patent on them. Their strategy is to sell parts for a new airline at a slight loss, to prevent competitors from entering - this is the first few years. Then for the next couple of decades of the life of the airplane, they are the only source for replacement parts. High margins, no competitor to speak of, religious price increases year after year. Airlines may hate them, but can't get rid of them. A competitor would have to design their own parts, have them FAA approved, convince airlines to buy it from them instead of a reputed leader like TransDigm and of course they have to be better/cheaper than TransDigm. Really a one-of-a-kind company. Link to comment Share on other sites More sharing options...
Liberty Posted May 7, 2014 Share Posted May 7, 2014 Amazing company really. They not only manufacture their parts, but also invent them and hold patent on them. Their strategy is to sell parts for a new airline at a slight loss, to prevent competitors from entering - this is the first few years. I think that's slightly incorrect. They only give parts at a loss while new airplanes/helicopters are in development. Once they are in production, they make money on what they sell to OEMs. It's just that the margins there are much lower than in the aftermarket. They do sell relatively inexpensive parts for which they are the sole source in about 90% of the cases, so it's usually not worth it for anyone else to go through the trouble of developing a competing part and getting it certified for a platform (a process that is long and expensive, and doesn't even guarantee they'll be able to steal much business from Transdigm because there are also non-monetary factors -- airlines care a lot about safety, and won't risk putting a part from a manufacturer that doesn't have the good reputation of transdigm just to save a few bucks. Not a good risk/reward profile). Transdigm is very good operationally too. They tend to buy businesses making margins in the 20% EBITDA range most of the time as far as I can tell, and over time bring them up to their own average which is in the high 40s. Anyone trying to compete with them likely won't have their low costs, so if they do get competition, TDG can probably undercut them and still make a profit because they have more margin to play with. Link to comment Share on other sites More sharing options...
Liberty Posted May 12, 2014 Share Posted May 12, 2014 Optimizing the capital structure again, and considering another special dividend: http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=1929518&highlight= http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=1930106&highlight= Link to comment Share on other sites More sharing options...
wbr Posted May 13, 2014 Share Posted May 13, 2014 Are the TDG special dividends "return of capital" and thus tax free? Link to comment Share on other sites More sharing options...
no_thanks Posted May 13, 2014 Share Posted May 13, 2014 Are the TDG special dividends "return of capital" and thus tax free? Yea, I believe they are. My cost basis at Fidelity was adjusted lower for the last one. Don't know about any future ones though. It's in my IRA so I haven't really paid any attention to it. Link to comment Share on other sites More sharing options...
Liberty Posted July 11, 2014 Share Posted July 11, 2014 Anyone have access to Credit suisse's new report? I'd be curious to see how they justify a 230 price target. Thanks in advance. Link to comment Share on other sites More sharing options...
Haasje Posted July 11, 2014 Share Posted July 11, 2014 Maybe I don't understand it correctly but I'm a little skeptical about selling parts in development stage at cost or negative margin and then squeezing every bit of value out of it after the OEM runs with them for these parts. I mean, they see this tactic coming a mile away with the next plane right? Why keep contracting guys as suppliers who are going to bleed you dry. Is that approvement process really so expensive no one wants to go through it and earn 20-30 years of duopoly-like margins? I'm not arguing there is no moat here, because the returns show there is, I'm just not so sure the approvement procedure and development stage pricing drive it. Link to comment Share on other sites More sharing options...
jschembs Posted July 11, 2014 Share Posted July 11, 2014 Anyone have access to Credit suisse's new report? I'd be curious to see how they justify a 230 price target. Thanks in advance. Here's the CS piece.file.pdf Link to comment Share on other sites More sharing options...
Liberty Posted July 11, 2014 Share Posted July 11, 2014 Anyone have access to Credit suisse's new report? I'd be curious to see how they justify a 230 price target. Thanks in advance. Here's the CS piece. Thank you, much appreciated :) Link to comment Share on other sites More sharing options...
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