The Ledger
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Tepper calls TransDigm's price-tripling aerospace model 'slightly parasitic'
“You have some like Transdime, for example, which relies on FAA certification and are pretty open about they triple the pricing when they purchase a little part, and they raise prices over six percent per year, regardless of what the underlying cost of producin…”
Tepper: High talent and high agreeableness generally do not go together
“And I think one of the important things is finding high talent and high agreeableness. Generally, these two don't go together.”
Tepper plans to close Prevatt Capital to prioritize capital-weighted returns
“But as a business, what I'd love to do is to Close the fund to outside investors. Focus on long-term capital-weighted returns, not just time-weighted returns.”
Tepper: There are only 500 to 600 natural monopolies globally
“Broadly, globally, I think there's between 500 to 600 companies, and some markets are obviously a little harder to invest in than others internationally.”
Tepper: Prevatt Capital will only double down on a position once
“We will only double down once. If you start doing more than that, you're essentially following the Martingale strategy, which is also known as gambler's ruin, and it's always the house that wins, not the gambler.”
Tepper: Prevatt Capital averages 16 stocks across its portfolio
“So 10 to 20 stocks, but we've really averaged sort of 16 over the life of the fund.”
Tepper: Financial exchange spent $500M on crypto platform, writing it down instantly
“Sometimes we've misjudged management, so we did own a financial exchange, and then they went out and spent half a billion dollars on a crypto exchange, and they surprisingly wrote down the acquisition the same quarter that they made it. To me, that was spectac…”
Tepper: Prevatt owns Knorr-Bremse, part of global rail brake duopoly
“We own Norbremse, which is a German rail brakes company. And globally, it's basically, for the last century, been a duopoly between Wabtec in the US and Norbremse in Germany producing rail brakes.”
Tepper: Prevatt bought Booking Holdings at launch at ~10% normalized FCF yield
“When the fund launched in May, 2020, the bottom in the market was in March, but people were still very fearful of COVID and no one was traveling. And so we felt that we were able to buy booking Close to a 10% normalized free cash flow yield with a terrific CEO…”