At Simple Wealth, we have been LONG HEICO (HEI) in the individual stock portfolios since 1/27/21, clients and myself included. I think this position exemplifies a lot of what we have been trying to go after in the approach—as David Gardner puts it: "Find good companies and hold those positions tenaciously over time to yield multiples upon multiples of your original investment."[1]

HEICO in Summary

In 1990, two sons, Eric and Victor Mendelson, went into business with their Dad (Larry) and purchased a struggling laboratory equipment and aviation business. What has resulted since has been an incredible story of family enterprise. It’s worked out beautifully for all parties. Since the acquisition, the family’s stewardship has resulted in around 20% annualized return on the common stock, and that is for a cool 35 years. The Mendelsons still own around 17% of shares, representing sizable ‘skin in the game’ exposure. 

So in HEICO we get a) the Mendelson leadership providing long-term family orientation, b) a fundamental high-quality business in a hard sector to disrupt, c) combined with capital allocation that has created a lot of value.

Parts for Planes

What HEICO does is make parts for planes. Think generic and off-the-shelf parts, but in a capital intensive business that is hard (almost impossible..?) to enter. They also produce critical electronic components for aerospace and defense applications.

They have several key advantages in their market:

• Specialized Technical Expertise: HEICO has developed proprietary engineering capabilities that allow it to reverse-engineer complex aerospace components—creating a knowledge moat that deepens with each part certification.[2]

• Structural Cost Advantages: Their business model delivers 30-50% cost savings compared to OEM parts while maintaining equivalent quality and reliability.[3]

• Disciplined Capital Allocation: The Mendelsons deploy capital with owner-like (because they are) discipline, emphasizing high-ROIC opportunities through both organic investment and strategic acquisitions.[4]

• Culture: They have cultivated a culture of entrepreneurship, cost discipline, and long-term thinking that permeates throughout their decentralized structure. When they buy a company they let the entrepreneurs run their ships at the subsidiary level.[5]

"What we're about is generating cash flow"

"[W]e do that in the aerospace, defense and electronics industries because those are very good places in which to make cash and to generate cash. You have dynamics there, kind of a slow-moving technology, so you're not at the bleeding edge of technology. Investments are made and then recouped over a very long period of time." - Victor Mendelson

The Upside 

Going forward there a few different avenues for growth:

• PMA Market Expansion: HEICO's position in Parts Manufacturer Approval alternatives has barely scratched the surface of addressable market opportunity as regulatory acceptance continues to grow globally. Consider how aerospace is highly regulated. They have the track record of working well with governments in getting their parts approved.[6]

• Acquisition Optionality: The company's reputation as a preferred acquirer creates proprietary deal flow—they purchase niche businesses at reasonable multiples before competition emerges. Since 1990 they’ve completed around 90 acquisitions, so in a way we can also think of this vehicle as a diversified holding company of sorts.[7]

• Defense & Space Innovation: Their Electronic Technologies Group is strategically positioned at the intersection of defense modernization. They have exposure to space, electronic warfare, and next-generation defense systems.[8]

Our Advantage 

As regular investors, we enjoy a bit of a psychological edge when investing in something like HEICO:

• We can patiently compound alongside the Mendelsons without quarterly performance pressure.
• We understand the business fundamentally, giving us confidence through inevitable volatility. HEI’s outstanding long-term returns have not always been a straight line up. We are fine with this. 
• We can meaningfully invest. As of early 2025, HEI is currently not included in the S&P 500 index (too small). In other words, those using a mechanical indexing approach have no exposure. By comparison, our core equity portfolios have around a 7% allocation. 

In short, HEICO gives us ownership alongside exceptional entrepreneurs in a genuinely useful business. 

Further Recommended Reading & Listening:

• Parts for Planes - Business Breakdowns, Episode 150: This podcast deconstructs HEICO's specialized aircraft parts business, including the engineering and regulatory challenges of reverse-engineering OEM components. 
• Victor Mendelson: HEICO: Troubled Asset to a "Hotshot Stock" - Ayna Podcast, January 30, 2023: A rare window into the family's decision-making process and candid reflections on HEICO's transformation from struggling enterprise to aerospace leader.
• HEICO 2024 Annual Report: Beyond the obligatory financial disclosures, the shareholder letter provides particularly valuable context.

Citations: [1] Flattery, Andy. "Back to Basics Investing," February 2021, p.1. [2] HEICO Corporation Annual Report, 2022, p.8. [3] Flight Support Group (FSG) segment analysis, HEICO Investor Presentation, Q3 2023. [4] "Long-term Capital Allocation Strategy," HEICO Investor Day, 2021. [5] Mendelson, Larry. "Building an Entrepreneurial Culture," Harvard Business Review interview, January 2019. [6] FAA PMA Market Analysis Report, 2023, p.42-45. [7] HEICO Corporation, "Acquisition Strategy and Integration," Investor Presentation, 2022. [8] Electronic Technologies Group (ETG) segment analysis, HEICO Annual Report, 2022. [9] Heico logo, public domain, sourced from Wikimedia Commons.

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