The Fund also added to its holdings in Westinghouse Air Brake Technologies Corporation (WAB, Financial), or "Wabtec." The company is a leading provider of component parts and services to the global rail industry. The company dates back to 1869, and it was an original part of George Westinghouse's industrial empire. Today, Wabtec is a leading supplier of critical components, such as airbrakes, couplers, doors, and electronics, to railcar and locomotive manufacturers. Once installed on these train platforms, Wabtec becomes an integral aftermarket service provider to various railroad operators and transportation authorities. As rail volumes naturally increase when the economy strengthens, more strain is placed on rail infrastructure assets, and Wabtec's aftermarket parts business benefits.
Wabtec is also a key vendor to mass transit systems, an area where we see attractive long term growth potential, as governments focus on reducing highway congestion via light rail and high-speed passenger train investments. In addition, Wabtec offers diversified international growth with nearly 50% of its revenues emanating overseas, where the addressable market opportunities are larger, the margins higher, and Wabtec's relative market share lower, all offering a runway for growth. Finally, Wabtec represents a key investment in rail safety initiatives through its leadership in Positive Train Control (PTC) technology. Positive Train Control, an on- board GPS system for locomotive engineers, may represent the greatest potential growth for Wabtec. With PTC, movement-related information, such as speed limits, track changes, signal aspects and work zones are passed through a digital communications network and displayed on a computer screen inside the locomotive. The onboard computer, with location information provided via GPS, is designed to automatically initiate braking if the engineer fails to properly do so, similar to an autopilot feature. PTC was embraced in a rail safety bill signed into U.S. law in 2007. The bill mandated the widespread domestic adoption of this safety technology by 2015. Currently, Wabtec is the only major player with an advanced commercial PTC offering. The company's bookings in this field are accelerating and represent its highest margin revenue source. (Matt Weiss)
From Baron Funds' fourth quarter letter 2013 to shareholders.
