Author Topic: TDG - Transdigm  (Read 136268 times)

rishig

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Re: TDG - Transdigm
« Reply #180 on: October 26, 2015, 12:12:22 PM »
Companies run by Outsider CEOs are great ones to invest in. But ignoring the framework of value investing is dangerous - as seen in Valeant, Colfax. Great company at a bad price removes the margin of safety element. It is hard to tell in foresight all the things that can go wrong - end markets are cyclical and cycle turns (Colfax), regulatory risks (Valeant).

Who knows all the things that can go wrong with Transdigm. Just because nothing has gone wrong doesn't mean it won't. At current valuation, in my opinion, the margin of safety is small to protect from the unknown unknowns. The same applies to Constellation Software.

Hi Rishi,

Do you consider your investments in MA/V (I don't remember if you own both or just MA) and PCLN, as well as GOOGL (I assume), to be exceptions? They don't seem to be particularly cheap.

I invested in MA/V in 2010 at ~15-16x P/E TTM, PCLN at 18x P/E TTM. GOOGL, I can't comment given my relationship there.

I continue to hold but I trim my position sizes as P/E goes up. Also, unlike Valeant and Transdigm, both have no debt.

The range of valuation for MA/V, PCLN during my holding period has been 15x - 28x on a TTM basis. The valuations at Valeant, Colfax have been way way higher.
« Last Edit: October 26, 2015, 12:14:31 PM by rishig »


Liberty

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Re: TDG - Transdigm
« Reply #181 on: October 26, 2015, 12:15:58 PM »
Thanks!
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Liberty

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Re: TDG - Transdigm
« Reply #182 on: November 19, 2015, 08:07:14 AM »
http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=2113950

Acquiring Breeze-Eastern Corporation for 206m. A public company this time.
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

giofranchi

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Re: TDG - Transdigm
« Reply #183 on: November 19, 2015, 08:25:27 AM »
I continue to hold but I trim my position sizes as P/E goes up.

Well, that is exactly how I invest in both CSU and TDG (and now in V and MA too): as long as P/E ratios stay high, I’ll keep my positions relatively small and leave lots of room to average down.

Cheers,

Gio
Portfolio: AAPL, AMZN, BABA, BOSS, BRK.B, FB, FFH, FIH.U, FINX, FWONA, GOOG, IBB, JPM, LBRDA, MKL, NKE, QQQ, SFTBF, SMH, TCEHY, V, XBI, XT

Schwab711

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Re: TDG - Transdigm
« Reply #184 on: November 19, 2015, 09:05:14 AM »
As a side game, here are my possible future acquisition targets for TDG (listed alphabetically):
ATRO
BZC
DCO
LMIA   (Presentation remind you of anyone? - http://files.shareholder.com/downloads/LMIA/0x0x828641/BD0D0F42-9CAF-403F-B0A2-159C22B0C10D/LMI_InvestorPresentation_May2015.pdf)


1 down, 3 to go.

giofranchi

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Re: TDG - Transdigm
« Reply #185 on: November 19, 2015, 09:15:29 AM »
I continue to hold but I trim my position sizes as P/E goes up.

Well, that is exactly how I invest in both CSU and TDG (and now in V and MA too): as long as P/E ratios stay high, I’ll keep my positions relatively small and leave lots of room to average down.

Cheers,

Gio

By the way it is not much clear how a low PE would protect you when an highly indebted company gets accused of fraud... The same is true for Colfax: after it got "cheap", it went on getting much cheaper...

You have chosen the right businesses so far in V, MA, and Google... Good for you! But imo the choice of the right business is what matters the most when you plan to hold an investment for years.

Cheers,

Gio
Portfolio: AAPL, AMZN, BABA, BOSS, BRK.B, FB, FFH, FIH.U, FINX, FWONA, GOOG, IBB, JPM, LBRDA, MKL, NKE, QQQ, SFTBF, SMH, TCEHY, V, XBI, XT

Spekulatius

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Re: TDG - Transdigm
« Reply #186 on: November 19, 2015, 05:28:49 PM »
Quote
By the way it is not much clear how a low PE would protect you when an highly indebted company gets accused of fraud... The same is true for Colfax: after it got "cheap", it went on getting much cheaper

CFX was never "cheap" and is certainly not cheap now. A business that trades at 20x earnings and may be shrinking for a couple of years is certainly not cheap in my book. Now a single digit earning multiple and a decent balance sheet, that would be cheap.
To be a realist, one has to believe in miracles.

giofranchi

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Re: TDG - Transdigm
« Reply #187 on: November 20, 2015, 12:06:23 AM »
CFX was never "cheap" and is certainly not cheap now. A business that trades at 20x earnings and may be shrinking for a couple of years is certainly not cheap in my book. Now a single digit earning multiple and a decent balance sheet, that would be cheap.

Well, I have never followed Colfax closely; therefore, I cannot be sure about what has actually happened.
However, if what you say is true, imo it only corroborates what I was saying: Colfax share price went south despite the fact its multiple hasn’t contracted much. The losses were generated by a business which didn’t perform like shareholders expected, rather than a PE that went from very high to low.
Also what you call a “decent balance sheet” is imo a business judgement: how much debt can I safely use? Which are the risks associated with the amount of debt I see on the balance sheet? What is conservative and what is aggressive? The answers differ from business to business.
By the way, Mr. Klarman in Margin Of Safety says these things very clearly.

Cheers,

Gio
Portfolio: AAPL, AMZN, BABA, BOSS, BRK.B, FB, FFH, FIH.U, FINX, FWONA, GOOG, IBB, JPM, LBRDA, MKL, NKE, QQQ, SFTBF, SMH, TCEHY, V, XBI, XT

NewbieD

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Re: TDG - Transdigm
« Reply #188 on: December 23, 2015, 10:54:21 AM »
GE Aviation orders 10 3D-printers to produce turbine blades:
http://nordicinvestor.net/2015/12/22/arcam-ge-subsidiary-orders-10-ebm-systems/

Turbine blades seem like a pretty mission critical part. If this can be 3D-printed, most parts could possibly be. Seems like this will decrease the value of transdigms manufacturing knowledge and machinery? I like the company but this fear is stopping me from buying.

big_triece

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Re: TDG - Transdigm
« Reply #189 on: December 23, 2015, 05:21:52 PM »
GE Aviation orders 10 3D-printers to produce turbine blades:
http://nordicinvestor.net/2015/12/22/arcam-ge-subsidiary-orders-10-ebm-systems/

Turbine blades seem like a pretty mission critical part. If this can be 3D-printed, most parts could possibly be. Seems like this will decrease the value of transdigms manufacturing knowledge and machinery? I like the company but this fear is stopping me from buying.

3D printing is not the game changer you think it is for aerospace. For each part that you are going to utilize 3D printing, you have to get that process approved by the FAA, which takes lots of time and money. You can't just say, we are switching to 3D printing for all parts. Mission critical or not, each one of those parts and the manufacturing processes have to undergo an approval process by the FAA, or foreign counterpart. For a company like Transdigm (or HEICO or PCP) that has hundreds, if not thousands, of parts / systems in the supply chain, it will be a long time before a competitor can eat away at their market share via a lower-cost manufacturing process. The playing field may start to shift away from them, but it will not occur quickly (IMHO).