TransDigm: Private Equity in the Public Markets with Rob Small [50X, EP.4]

50X

This is our final episode in a series of four on TransDigm. In this discussion, we contrast TransDigm with traditional private equity portfolio companies, examine the company’s approach to capital allocation, and dissect Berkshire’s and Stockbridge’s position management over time. Our guest is Rob Small, a Managing Director at Berkshire Partners and Stockbridge, as well as a Director at TransDigm. Under Rob’s direction, Stockbridge has maintained a concentrated position in TransDigm and demonstrated remarkable conviction to add (and occasionally trim) at opportune times.

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

[00:02:04] – Sponsorship: Tegus

[00:07:18] – [First Question] - Management Team

[00:10:05] – Culture, Decentralization, & Compensation

[00:19:04] – Evaluating Nick Howley as CEO

[00:21:57] – Rob’s Service on the Board of Directors

[00:27:47] – Approach to Capital Allocation

[00:31:29] – Returning Capital to Shareholders

[00:33:53] – Operating under Private vs. Public Ownership

[00:36:41] – Sale Decisions for Private vs. Public Equity

[00:40:41] – Stockbridge’s Major Buy/Sell Decisions

[00:48:46] – TransDigm’s Influence on Rob’s Investment Philosophy

[00:53:39] – Examining Stockbridge’s Approach to Selling

[00:58:14] – TransDigm’s Future