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HEI/PCP/TDG Thoughts?


Guest notorious546
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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

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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.

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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.

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