Episode notes
Daniel Mahncke and Shawn O’Malley follow up last year’s TransDigm pitch with the biggest monopoly in aviation: GE Aerospace (NYSE: GE), the engine maker behind nearly three out of every four commercial flights in the world. With roughly 50,000 commercial and 30,000 military engines in service, GE has the largest installed engine base worldwide. That’s the reason Chris Hohn bets about 30% of his $50+ billion portfolio on it.
Daniel and Shawn dig into the mechanism behind how GE sells its engines at roughly zero margin because every engine comes back as three and a half times its sale price in spare parts and shop visits over 25 to 30 years. They also cover the Cold War deal that put a GE engine core in a locked room in France, how Larry Culp turned a company Nelson Peltz was sure would file for Chapter 11 into three companies worth more than $600 billion, and whether Heico’s copycat parts and the regulators now circling the engine aftermarket can dent the pricing. In the end, they walk through the valuation model and decide whether the best business in aviation is worth its price — and whether GE earns a spot in The Intrinsic Value Portfolio.
IN THIS EPISODE YOU’LL LEARN:
(00:00:00) Intro
(00:03:44) About the history of aviation and GE
(00:14:15) Why engines became a political product
(00:25:58) What makes GE such a great compounder
(00:26:58) Why the aftermarket is so attractive
(00:28:16) Why GE is the pinnacle of aerospace
(00:57:09) How CEOs destroyed and turned around the business
(01:06:22) What GE’s stock is worth
(01:14:51) Whether GE will be added to The Intrinsic Value Portfolio
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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- Rijinkberg investing GE Aerospace Deep Dive.
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