Home Manufacturer fund Here’s why TransDigm Group (TDG) has become a significant contributor to Vulcan...

Here’s why TransDigm Group (TDG) has become a significant contributor to Vulcan Value’s second quarter results


Vulcan Value Partners, an investment management firm, has released its second quarter 2021 “Large Cap, Small Cap, Focus Composite, Focus Plus Composite and All Cap Composite” letter to investors – a copy of which can be downloaded here. Vulcan’s large-cap composite fund generated a net return of 12.4% for the second quarter of 2021, 9.9% for the small-cap fund, 14.8% for the Focus composite fund, 13.9% of yield for the Focus Plus composite fund and 13.6% were earned by the All Cap Composite Fund for the same period. You can take a look at the top 5 holdings of the fund to get an overview of their top bets for 2021.

In the second quarter 2021 letter to investors from Vulcan Value Partners, the fund mentioned TransDigm Group Incorporated (NYSE: TDG) and discussed its position on the company. TransDigm Group Incorporated is an aerospace manufacturing company based in Cleveland, Ohio, which currently has a market capitalization of $ 34.6 billion. TDG has achieved a return of 2.51% year-to-date, bringing its 12-month returns to 33.45%. The stock closed at $ 624.55 per share on August 5, 2021.

Here’s what Vulcan Value Partners has to say about TransDigm Group Incorporated in its Q2 2021 letter to investors:

TransDigm Group Inc., another major contributor during the quarter, is an aerospace manufacturer that supplies highly sophisticated niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Its activity has been impacted by the global pandemic; However, the company has been able to maintain its margins despite strong headwinds in revenue, and it continues to generate significant free cash flow. “

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Based on our calculations, TransDigm Group Incorporated (NYSE: TDG) was unable to secure a spot on our list of the 30 most popular stocks among hedge funds. TMD was in 62 hedge fund portfolios at the end of the first quarter of 2021, compared to 64 funds in the fourth quarter of 2020. TransDigm Group Incorporated (NYSE: TDG) has generated a return of 4.34% in the last 3 months.

The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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Disclosure: none. This article originally appeared on Insider Monkey.