TransDigm looks more reasonably valued after its forward P/E fell from 40x to 27x on a $1.5B market value drop for withdrawing from a $1B acquisition. Walking away shows discipline, even though acquisitions are where TransDigm makes great money. @PythiaR argues the real issue is the DOJ's signal on its ability to do M&A, a key growth driver given its lack of engine exposure; that makes things a little tougher, but the company will find a way. x.com  x.com  x.com 

TransDigm's valuation has normalized to roughly the same multiple as 10 years ago, which looks reasonable, even cheap. Organic growth prospects are probably as good as before and COVID proved the business is a cockroach. Against that, M&A is less of an opportunity now given the law of large numbers, and rates are higher. It is probably less undervalued today than a decade ago, but not by much. x.com  x.com 

TransDigm's heavy debt load is a massive risk if anything goes wrong. It is levered over 5x EBITDA on the assumption it can grow organic EBITDA 4-6% forever without political pushback. Shareholders such as @PythiaR calling the debt an asset is a sign of extreme sentiment, and the market is underwriting 10 to 20 years out. x.com  x.com  x.com  x.com  x.com 

TransDigm's pricing power on critical sole-source parts plus disciplined capital recycling is why its multiple has held for a decade. About 90% of sales are proprietary and three-quarters sole source, with high-margin aftermarket at 55% of revenue; organic sales grew 13% last quarter. About $2.6B of free cash flow funds bolt-on deals and buybacks, with leverage at 5.8x. At about 18 times EBITDA after an 18% drop, cooling engine aftermarket growth should narrow the gap and rerate it. x.com  x.com  … Show more

Broadcom is still run by one of the greatest capital allocators and operators ever, CEO Hock Tan, at an undemanding valuation. In 2018 it was similarly disrespected despite Tan's track record and a low multiple, and the stock has since risen 16-fold. x.com 

TransDigm is only a buy around $500 given its leverage, regulatory risk and reliance on pricing. Trading below its 200-day moving average also sets a much higher bar for buying. x.com 

Caterpillar, Microsoft, Waste Management, Visa, JPMorgan and Mastercard are dividend compounding machines that also buy back shares rapidly, and great stocks return value to shareholders. Since 2013, Mastercard's dividend per share is up 2,517% with shares outstanding down 27.4%; Visa's dividend is up 888%, Microsoft's 304% and JPMorgan's 334%. Caterpillar has cut its share count 30%, JPMorgan 27.6% and Waste Management 13.3%. x.com  x.com  x.com  x.com  x.com  x.com 

HEICO is a rare compounder because owner-managers with a decentralized culture keep growing niche, FAA-approved aerospace parts. The Mendelson family owns about 20%, and the stock has compounded about 22% a year since 1990. Q2 revenue rose 25% to $1.38B and EPS 49% to $1.66, both beating estimates. Planes fly 30+ years and need parts throughout, in an aerospace market projected to grow from $330B in 2023 to $662B by 2033. The stock is always expensive; low $40s would be a lucky entry. x.com  … Show more

Founder-led companies have been proven to outperform over time, because a founder who still holds a large stake brings a sense of urgency that can't be replicated. Quality examples today include Dell, with Michael Dell holding 41%; Meta, with Mark Zuckerberg at 14%; AppLovin, with Adam Foroughi at 11%; Sea, with Forrest Li at 16%; and Nvidia, with Jensen Huang at 3.6%. x.com  x.com  x.com  x.com  x.com