HEICO (HEI) is the kind of niche business I love. The firm makes replacement parts for the airline industry, explains Eddy Elfenbein, editor of Growth Stock Advisor.
Sexy, right? Well, not exactly, but let’s consider a few things. If a commercial aircraft needs some obscure new part, they can’t run down to the local hardware store.
Instead, the company needs to special order it. Moreover, there’s a great deal of cost pressure on the airlines to keep the older planes serviceable.
Aircraft parts also often need to meet strict regulatory guidelines. The part-maker really has to know what it’s doing. That’s where HEICO comes in, with its FAA-approved aircraft replacement parts.
HEICO is lean and well run. Last year, the company did $1.9 billion in business. The company would have probably cracked $2 billion this year, if not for the economic lockdown. HEICO’s long-term track record is very impressive—and the stock is still well below its high:
The aviation industry is broadly diversified, and HEICO is also able to get sales from both commercial and military customers. That means that if there’s a drop off in one end of the business, that other side can pick up the slack. Wherever there’s a demand to cut costs, HEICO has the potential to do well.
By the way, HEICO supplies more than aircraft parts. They also supply parts for satellites, rockets, missiles, and even medical devices.
Although the company is great, I still have some concerns about how quickly the airline industry will rebound. With so few planes flying, not many will need repairs. But I’m keeping a close eye on HEICO.
