Billionaire investor and chairman of Berkshire Hathaway, Warren Buffett, bought 1.04 million Class A shares of aerospace and electronics company Heico Corporation (NYSE: HEI.A) for $185.37 million in Q2, according to the latest 13F filing. Heico operates in two segments: the Flight Support Group (FSG) and the Electronic Technologies Group (ETG), where most of its revenue comes from the FSG segment.
The FSG segment offers premium aftermarket parts supply and repair solutions to top airlines worldwide. It is a leading supplier of FAA-approved aircraft engine and component parts and provides maintenance, repair, and overhaul services fulfilled via its subsidiaries to commercial, defence, and industrial clients. Meanwhile, ETG designs and develops electrical subcomponents and systems, including power supplies, microwave latching switches, harsh environment connectors, and memory modules for aeroplanes, satellites, missiles, launch vehicles, and medical devices.
Heico Posts Record Quarterly Numbers
Heico posted record net income, net sales, and operating income for the quarter ended April 30. The company's FSG segments posted 15 consecutive quarters of sequential net sales growth, which jumped 39% during the quarter to reach a record $955.4 million. Company CEO Laurans A. Mendelson attributed the robust results and organic growth to its 2023 acquisitions and solid contributions from FSG and the electronics business, driven by the high demand for its aerospace and defence products.
Heico's cash flow also surged by 82% year-over-year (YoY) to $141.1 million during the April quarter, and management expects the trend to continue, given the company's growing operations. FSG's record $647.2 million quarterly net sales were driven by rising demand in its aftermarket replacement parts, repair, and services divisions. ETG's net sales growth jumped 6% YoY to $319.1 million. The segment's operating income improved markedly due to reduced acquisition costs and better gross profit margins. Senior management remains committed to designing new products and services for better market penetration.
Heico Remains A Strong Dividend Player
The company has consistently paid dividends over the last several decades and continues to return value to investors due to strong financial and operational performance. Heico's directors declared a 10% semiannual cash dividend hike to $0.11 per share, marking the 92nd consecutive dividend payout since 1979. The Class A shares have jumped over 31% year-to-date to close at $187.70 on August 20. Buffett's Heico bet is unlike his approach to value investing or buying great companies at cheap prices since Heico's normalized price-to-earnings ratio remains higher than rivals and the industry average, indicating shares could be overvalued.
Buffett Invests In Beauty Brand, More Than Doubles Stake In Audio Company
Buffett's new addition to Berkshire Hathaway's portfolio includes Illinois-headquartered cosmetics brand Ulta Beauty (NASDAQ: ULTA). During the April-ended quarter, he bought 690,110 shares of ULTA worth $266.29 million. The company's net sales and net income improved to $2.7 billion and $313.1 million, respectively, for the quarter ending May 4 as it improved its store footprint to 1,395, totalling 14.6 million square feet in area. The company repurchased over 588,000 shares for $285.1 million during the quarter as part of its $2 billion share buyback program announced earlier this year.
The Oracle of Omaha also strategically increased his stake in audio entertainment company Sirius XM Holdings (NASDAQ: SIRI) by 262.24% to own 132.88 million shares worth over $376 million. The move comes ahead of Sirius XM's plans to complete its merger with several of Liberty Media Corporation's businesses in Q3 to create a new public company that will facilitate better trading liquidity and ownership structure. SiriusXM boasts 150 million combined monthly listeners across its music streaming platform, entertainment services, podcasts, in-studio exclusives, and live sports and news analysis.
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