TransDigm Group (TDG, Financial) is a designer, producer and supplier of engineered aircraft components for use on commercial and military aircraft. The prospect of rising interest rates and accusations of rigged/fake bids from a critical short report pressured TransDigm’s stock during January. The company’s levered balance sheet, while married with historically consistent cash flows, increases the company’s sensitivity to potential declines in profitability. In his first several weeks in office, President Trump targeted the cost of specific programs at several of TransDigm’s larger peers. While it remains to be seen what, if any, lasting impact this scrutiny will have on growth and cash flow, with TransDigm’s shares close to our estimate of intrinsic value, we elected to close our position in the stock with a nice gain.
From Weitz Value Fund first quarter 2017 commentary.
