Stockchase Opinions

Stephen Weiss, Founder, Short Hills Capital Partners TransDigm Group TDG-N BUY Apr 03, 2024

They make airplane parts.  They've acquired 48 companies in this space, so no matter what plane you fly, TDG makes a piece of that. They have pricing power. A permanent compounder.

$1228.510

Stock price when the opinion was issued

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TOP PICK

A leading supplier of engineered parts for both commercial and military aircraft. 70% of their business is the aftermarket. Lots of great future growth available here.

PAST TOP PICK

(A Top Pick July 19/16. Up 16%.) An aerospace and defense company. They supply lots of mundane things to the airline business. Someone has decided to target this company saying that they buy and acquire companies, and then change the pricing. As soon as he saw the one negative story, he stepped aside and will come back when the dust settles.

PAST TOP PICK

(A Top Pick July 19/16. Up 20.36%.) One of the best aerospace aftermarket companies. They had a big dip in February and April which caused a lot of concern because of a negative report, but this company keeps plugging away and persistently grabbing market share. A high cash flow machine and a high barrier to entry. He would like to get back into this as some point.

TOP PICK
They had a good, long decade, until a short report in late-2016 alleged fixed government contracts. Low volatility and growing its sales at 17% annually. They're in the airline business: power control, airframe (seatbelts, bin latches) and especially a secondary repair business. TDG moves closely to Boeing. Strong cash flows. This will go up and down with US-China trade talks. (Analysts’ price target is $434.78)
PAST TOP PICK

(A Top Pick Feb 12/19, Up 63%) The long-term chart enticed him to buy. They're in aerospace. 90% of sales are from proprietary products. 70% of what they sell, they are the sole-source provider. Also, only 3% of their business is from the Boeing 737 Max. They won't raise guidance because of coronavirus worries. They recently gave investors $3.5 billion in special dividends, yet still expect to have $3 billion in cash by year's end.

HOLD

Aftermarket manufacturer of airline parts (cheaper).
Very high debt levels a concern.
Good margins on products.
Strong business, but prefers other names in sector. 
Current valuation high. 

BUY

The aerospace sector is a bull market now. TDG has a good balance sheet.

TOP PICK

Sole source for low-value components, like bathrooms and seatbelts, in high-value aircraft. Aircraft fleets are getting older. Airline miles continue to grow. Great compounder, best position in its value chain. 

No dividend, but it does have regular cash and special dividends, which speaks to management quality. If management can't find a good acquisition, it diverts the cash to shareholders instead.

(Analysts’ price target is $1451.95)
TOP PICK

Aerospace replacement parts such as seatbelts, for which it gets paid a hefty price. Serial acquirer. Uses a lot of leverage to pay out special dividends. Sees long-term growth in global air travel, and this name will benefit. No dividend.

(Analysts’ price target is $1494.73)