Berkshire's Heico (HEI) investment has been a great pick so far. It's a small position by Berkshire standards, so may be a Weschler / Combs pick (?) Great looking company, though the PE is now 75 range, which is unusual for a Berkshire stock -
We came across a bullish thesis on HEICO Corporation (HEI) on Substack by Bulls On Parade. In this article, we will summarize the bulls’ thesis on HEI. HEICO Corporation (HEI)'s share was trading at $242.70 as of April 23rd. HEI’s trailing and forward P/E were 59.93 and 57.14 respectively according to Yahoo Finance.
Heico Corporation (HEI) represents one of those rare investment gems that quietly compounds value over decades, eschewing flashy narratives for disciplined execution and relentless focus on niche dominance. Founded in 1957 in Hollywood, Florida, Heico started modestly as a maker of aerospace components. But it was in the 1990s, under the stewardship of the Mendelson family—Laurans, Larry, and Victor—that the company’s real transformation began. Laurans Mendelson, now Chairman, saw the potential to specialize in high-margin, low-competition aerospace and defense niches, laying the groundwork for what is now a $36 billion market cap powerhouse. Heico’s rise has been anything but meteoric; it’s the product of a slow, steady strategy built on consistency, operational excellence, and a laser focus on where it can be indispensable.
The company operates in two primary segments: the Flight Support Group (FSG), which designs and manufactures FAA-approved aftermarket aircraft parts, and the Electronic Technologies Group (ETG), which produces specialized electronics for aerospace, defense, and industrial applications. While FSG serves as the steady cash generator, giving airlines cost-effective, high-quality alternatives to OEM parts, ETG caters to defense contractors and government agencies with advanced, often mission-critical electronics. Heico’s strength lies in its ability to dominate carefully selected niches, where it can build long-term customer relationships and face limited competitive pressure. This niche-first strategy is supported by a robust acquisition engine—Heico has completed over 70 acquisitions since the '90s, all small, profitable businesses that slot seamlessly into its ecosystem without requiring massive integration overhauls. The approach is surgical, not scattershot, and the results speak for themselves.
What truly sets Heico apart, however, is its capital allocation. With a net debt-to-EBITDA ratio now down to 2.06x from 3.04x a year ago, the company demonstrates a prudent approach to leverage. Rather than indulging in aggressive debt-fueled expansion or flashy shareholder payouts, Heico channels its cash into expanding its core operations, funding R&D, and making disciplined, accretive acquisitions. It pays a token dividend—just $0.22 annually, yielding under 0.1%—but this is by design. The management team, led by the Mendelsons, prefers to reinvest excess capital to drive compounding returns over the long haul, and given their track record, it’s hard to argue with the approach.
Heico’s most recent earnings for Q1 fiscal 2025, ending January 31, underscored the strength of this strategy. Net income jumped 46% year-over-year to $168 million, or $1.20 per diluted share, while revenue climbed 8% to record levels. FSG was the standout, delivering 15% revenue growth and a 35% increase in operating income, driven by 12% organic growth and smart acquisitions. ETG, while facing temporary headwinds from inventory destocking, remains well-positioned with a strong backlog and pipeline. Importantly, operating cash flow remains robust, ensuring ample liquidity for continued M&A activity. Management has reiterated its bullish outlook, highlighting a healthy acquisition funnel and broad customer demand across both segments.
Of course, the one point that might give investors pause is valuation. With shares trading around $260, Heico commands a trailing P/E of 64 and a forward P/E of 55—premium territory by any measure. Analysts expect 13.4% annual EPS growth and 10.3% revenue growth over the next few years, and the stock's average price target of $270 suggests modest upside. Still, Heico’s PEG ratio of 3.32 reflects a quality premium more than speculative froth. For investors focused on long-term compounding and business quality, this valuation may be justified. The company’s nearly five-decade dividend history and consistent earnings expansion lend further credibility to its durability.
In essence, Heico isn’t trying to be the next big disruptor—it’s content being the steady performer, the business that just works. It’s not going to make headlines, but it will likely continue doing what it has always done: find defensible niches, dominate them quietly, allocate capital smartly, and let the results speak. In a market saturated with hype and volatility, Heico offers something rare—reliability, predictability, and patient compounding. For those willing to embrace the boring brilliance of a business built for the long haul, Heico might just be the kind of quiet giant worth owning.
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