The Sneakier Play in the Flight Royalty Basket
HEICO (NYSE: HEI) is the name Dylan Jovine presents as the quieter member of his Flight Royalty Three. Where TransDigm owns the original designs and prices them aggressively, and Howmet forges the parts that go into the hottest part of the engine, HEICO competes by making certified copies of other companies’ parts and selling them for less. It is the pressure valve in the aerospace aftermarket, and it has been quietly compounding for decades.
The company is family run, which is rare in a sector dominated by institutional rollups. That family control shows up in the balance sheet, where HEICO carries roughly $2 billion in debt against a $52 billion market cap, far less debt than a typical aerospace consolidator. The discipline is the point: HEICO grows steadily rather than borrowing to buy growth.
How the PMA Model Works
HEICO’s core business is built on Parts Manufacturer Approval, or PMA. When the FAA certifies an aircraft design, every part on it is tied to that certification. A PMA holder gets the regulator’s approval to manufacture a replacement part that is functionally equivalent to the original, without being the original maker. The result is a certified copy that airlines can buy at a meaningful discount to the branded part.
That model works because airlines and militaries are cost-sensitive operators running older fleets. When the original maker prices a replacement part with monopoly economics, a PMA alternative gives the buyer an escape hatch. HEICO does not need to win every part; it needs to win enough of the high-value ones where the original maker’s price has run far above the cost of production. The commercial half of that logic, and why older planes drive the demand, is covered in our commercial aircraft explainer.
The Numbers Behind the Pick
HEICO’s revenue splits roughly 65% defense and 35% commercial, which gives it exposure to both halves of the Flight Royalty thesis. It grows in the low-to-mid teens, a slower rate than Howmet but with a cleaner balance sheet and a longer runway of parts it has yet to copy. Jovine shows the position up 79% since he opened it in July 2021, a mark tied to his own entry point.
The valuation is the part a new reader has to weigh carefully. At around $374.67 per share, HEICO trades above 50 times forward earnings. That is a premium multiple for a low-to-mid-teens grower, and it means the market has already priced in a long runway of PMA wins. A reader buying today is paying for that history, not stepping into the 79% gain Jovine is showing. For how HEICO fits next to TransDigm, Howmet, and Mercury Systems, see our aerospace and defense stocks explainer, and for the rollup playbook HEICO sits opposite to, our Esterline Technologies case study shows the TransDigm side of the same market.
Why the Model Has Held Up
What makes HEICO durable is that it does not depend on any single program or customer. It has built a catalog of PMA parts across engines, avionics, and aircraft systems, and it keeps adding to that catalog year after year. When an airline faces a monopoly price on a certified part, HEICO’s alternative becomes the obvious choice, and that dynamic is strongest precisely when the fleet is oldest and cost pressure is highest, which is the exact environment Jovine is describing.
The family-run structure adds a layer of stability that matters in a sector where management teams often turn over. HEICO has had the same leadership philosophy for decades, and it has never relied on heavy debt to generate its returns. That combination of steady growth, a low-cost moat, and a clean balance sheet is why Jovine calls it the sneakier play in the basket rather than the headline name.
HEICO’s staying power comes from a feedback loop. Every PMA part it certifies expands the catalog, every catalog addition gives airlines another reason to choose HEICO over the original maker, and every win generates the cash that funds the next certification. It is a slower flywheel than TransDigm’s debt-funded acquisitions, but it requires almost no borrowed money to keep spinning. That is why the family has been able to compound the business for decades without ever needing a rescue. The trade-off is the price tag, above 50 times forward earnings, which assumes the flywheel keeps turning for years to come. For a patient investor who accepts that assumption, HEICO is the kind of quiet compounder that never makes headlines but shows up in the aftermarket numbers quarter after quarter.
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