50X TransDigm: Operator to Capital Allocator with Nick Howley [50X, S1 EP.3]
Communicating with Shareholders
- Communicate consistently and honestly with shareholders.
- Treat public markets like a marathon, not a sprint, building long-term trust.
Attracting Long-Term Investors
- Warburg exited its position in TransDigm around 2007-2008.
- The financial crisis helped establish a core group of long-term investors who understood TransDigm's model.
Building Conviction in Leverage
- TransDigm gradually increased leverage over several years after going public.
- This demonstrated growing confidence in their business model and convinced the market of their ability to manage higher leverage.
This is our third episode in a series of four on TransDigm. In this discussion, we study TransDigm’s evolution while under public ownership. Since 2006, the company has outperformed the S&P by 15-fold and its peer group by 9-fold. We unpack its approach to special dividends and leverage, examine meaningful acquisitions alongside disruptive crises, reflect on the prior three decades, and consider TransDigm’s future beyond $50 billion of Enterprise Value. Our guest is Nick Howley, the Founder and Executive Chairman of TransDigm.
For the full show notes, transcript, and links to mentioned content, check out the episode page here.
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This episode is brought to you by Tegus. The team at Tegus has built a full company intelligence platform aimed at streamlining the investment research process. In preparation for the 50X series, we actively used Tegus to gain qualitative insights beyond traditional reported data. To learn more and enjoy a free trial, visit tegus.co/50x.
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50X is a podcast that dissects the anatomy of extraordinary long-term investments. The show is hosted by Will Thorndike and the team at Compounding Labs, and brought to you in partnership with Colossus.
In each episode of 50X, we look in detail at an investment that has appreciated at least 50-fold. From the seat of the professional investor and occasionally the CEO, we explore its origins, evolution, and eventual outcome, studying key themes around long-term value creation ranging from operations, capital allocation, and culture to pivotal buy and sell decisions. To enhance the quality and depth of our interviews, we rigorously study each asset in advance, diving into all available public and private resources.
Learn more and dive into our research at 50xpodcast.com
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Show Notes
[00:00:00] – 50X Introduction
[00:01:56] – Sponsorship: Tegus
[00:05:58] – CEO Time Allocation Post-IPO
[00:09:08] – Attracting Long-Term Shareholders
[00:10:00] – Evolution of Board Post-IPO
[00:11:06] – Approach to Leverage and Protecting Downside
[00:15:16] – Navigating the Great Financial Crisis
[00:18:43] – Approach to Special Dividends
[00:22:04] – Stock Repurchases as Alternative
[00:23:00] – Kirkhill Acquisition
[00:27:00] – Esterline Acquisition for $4 Billion
[00:33:17] – Investing in Product, Quality, and Innovation
[00:34:40] – Remaining M&A Runway
[00:36:32] – Short Seller Assault in 2017
[00:42:26] – Navigating COVID-19
[00:46:59] – Approach to Managing through Crises
[00:47:50] – Nick’s Transition from CEO to Chairman
[00:56:30] – Managing Personal Liquidity
[00:59:23] – The Howley Foundation
[01:02:57] – Snapshot of TransDigm Today
[01:05:11] – Lightening Round
[01:10:18] – TransDigm’s Influence on Nick’s Life and Investment Philosophy