Why WCM Owns HEICO in the WCM Quality Global Growth Portfolio

A key focus of the WCM Quality Global Growth portfolio is to find quality global companies with durable, strengthening economic moats and corporate cultures aligned to this growth.

For more than 60 years HEICO has produced state-of-the-art aerospace aftermarket parts. Its commitment to its employees and producing the highest quality products has lead HEICO to be ranked as one of the 100 “World’s Most Innovative Growth Companies“.

In this short video, Brian Huerta of WCM Investment Management explains why HEICO is a firm favourite in the Quality Global Growth portfolio.

Stock in Focus: HEICO

Alistair Dunne (AD): Hello and welcome to another Stock in Focus, my name is Alistair Dunne and joining me from WCM Investment Management is Brian Huerta. G’day, Brian.

Brian Huerta (BH): Hi Alistair.

AD: Now, today we’re going to talk about HEICO. Can you tell us what they do and who they are?

BH: HEICO is a company that makes FAA-approved aerospace aftermarket parts, and these are high-quality parts that can’t fail as you don’t want a disaster or a crisis in the air! They’re specially engineered, HEICO work very closely with their customers to create these products, and they’re considered a neutral party. This is a part that is provided by HEICO and it’s not from the original equipment manufacturer. So they really have this specialized product that is considered to not fail, and the business has a long history and a great reputation with their customers.

AD: And what about their competitive advantage? How does WCM define it and how is it growing?

BH: They have so much reputational value. I should start by saying this is a company that started in the 50’s and went public in the 60’s. They are very customer-focused; they intentionally place their best salespeople, who are often engineers, close to their customers. They have a real partnership with the customer. They really want it to be a win-win relationship. They covet those relationships, they don’t make products on spec, so every product that they make has been initiated by their customer. It really protects their business, it fends off their competition, and it’s just a win-win mentality that they have with their customers that protect that moat.

AD: And what about HEICO’s culture? How does that support that advantage?

BH: This is probably one of the strongest cultures that we follow, it’s led by a gentleman by the name of Larry Mendelson, who’s been at the helm since 1990. He’s been at the company even longer than that.

It’s a real family environment when you walk into one of the manufacturing warehouses, or their corporate offices, they are very humble offices. Laryy has, and what he instils in the whole organization is just an owner mentality: all employees are eligible for the 401K; the company matches up to 5% of their salary and the 401K in HEICO stock.

Everyone is on board, as everyone feels like an owner. Many people have had enormous wealth built, starting at the very bottom, earned over 30 years. This all keeps the employee attrition very low, the loyalty very strong, and Larry Mendelson really sets the tone and sets the culture, is really a champion of the company and has been there for years.

AD: Brilliant, thanks Brian, thanks for taking us through it and I look forward to seeing you next time.

BH: Thanks, Alistair.

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