HEICO Corporation (NYSE:HEI) manufactures and sells aerospace and related products through its Flight Support Group and its Electronic Technologies Group.
First, a bit of history: I first took a position just about three years ago and have added a little bit along the way through reinvested dividends, adding once again a couple of weeks ago. Since originally buying price to book is up 100%, price to cashflow is up roughly 20% and price to sales is up roughly 10%.
It's the Flight Support Group [FSG], which is responsible for most of the gain in sales and operating income in the nine months ending 7/31/07, that's so compelling. FSG provides replacement aircraft parts to commercial carriers and has a tiny share of a market dominated by the OEMs (UTX, GE), but enjoys a 17% operating margin vs. 11% for UTX and 13% for GE (FSG vs. all of GE and UTX). Replacement parts are a good business because it's hard to get Federal authorization to be a provider.
I own HEI because it enjoys an increasingly profitable niche (unit operating income up 48% in the nine months ending 7/31/07, compared to the same period in 2006) in an industry with a high barrier to entry and a customer base with few provider options.