Simplified TDG biz model

Bull thesis is simple, just read the investor day. Super long duration monopoly positions across 300K active SKUs with massive pricing power in the aftermarket. TDG keeps getting spec'd in on the OEM side which means further AM profits down the road.

The machine running all of this is incredibly well designed with top marks across decentralization, incentives, KPI measurement, talent management etc. Stability of cashflows fully harnessed via max leverage. Great M&A playbook. High inside ownership.

The bear thesis is that all good things taken too far become problematic. A machine running at 90th percentile like CSU, FSV, HLMA etc. is extremely powerful, but what happens when the machine runs at 99th percentile? When does it run too hot?

What happens when pricing has been pushed hard for 2 decades but you gotta keep doing it and go thru a painstaking presentation, every Q, in front of an exec team that will grill you line by line, submarket by submarket, as to why you're not hitting your EBITDA growth goals

and the 15-20% of mgrs. who don't hit the goal get culled every year or two. Do you just keep skewing yourself more towards the people who will do whatever it takes?

Is that how you end up with 10%ish of your subs not reporting their corporate ownership in SAM (gov't procurement system) presumably based on TDG's MO to always fly under the radar as much as possible?

Is that how you end up partnering with distributors whose sole function is to create the illusion of a competitive market and who get paid a nice margin for basically doing no work (holding no inventory etc.) other than helping to confuse inexperienced gov't procurement officers?

(to be fair, the distributor tactic is super old, from 2006 OIG report).

Ending up in 3 separate OIG reports in the span of 13 years is no mean feat (not to mention a bunch of firefighters suing you).

The real issue is the stuff we don't know that's almost certainly happening underneath the surface. There is clearly a lot of tension internally to keep hitting the numbers from an already extremely high level, and as the biz gets bigger those tensions will continue to grow.

It could quite easily be sustainable for another 10 or 20 years before something really bad happens, if at all. It's not clear cut at all. Clearly they've been doing it harder than everyone else for a very long time

And I really do want to love the company - who doesn't want a biz where the machine executes at the 99th percentile in a market like that.

But esp with that leverage, it cuts both ways. I'm not really concerned about the commercial side, it's more about what they're doing on the gov't side which is just so out of whack with what anyone else does and they gotta be rly aggressive to earn that 70% margin on the gov't

It's probably sustainable for a long time - as @heartof_thesea said, they're not denying old ladies their life-saving medicine, so nobody will care. But it does remind me a bit of this
https://twitter.com/heartof_thesea/status/1318000101198016512?s=20, and i'd just find it tough to sleep at night.