TransDigm Group Incorporated (NYSE: TDG)
TransDigm Group is having an incredibly hard time in the market today. When the trading session opened for the day, the stock was already trading slightly in the red, but no one expected what we would see just 15 minutes in. A report was published by Citron Research that sent the stock tumbling as Trump took the Office of the President of the United States. Below, we’ll talk about the report, why the stock is in trouble with Trump taking office, and what investors should be watching ahead.
What We Saw From The Citron Report On TDG
Citron Research is a well-liked, incredibly trusted research firm. The group has uncovered massive scandals in the past, most notably, the Valeant Pharmaceuticals/Philidor scandal. Well today, they released a report with regard to TransDigm Group, outlining that they are the perfect target for a Donald Trump beat down.
The reason for this is simple. TransDigm Group is a company that makes parts for airplanes. One of the largest companies that it calls a client is Boeing, a company that has a massive military contract. We’ll get to why that’s important later. Another thing that you should know is that the company depends on debt-fueled acquisitions to continue growing. These acquisitions are generally acquisitions of companies that make unique aerospace parts. Once it acquires the companies, it increases the price of these unique parts, essentially forming a monopoly and charging whatever it wants.
This Doesn’t Bode Well With Donald Trump!
Donald Trump has been very clear that he believes that the United States government spends far too much money. One of the reasons for this spending is simply price gouging with regard to government contracts. Here’s are the key points that Citron pointed out that make TDG a perfect target for a Trump attack…
- Costing Government Extra Money – Because of the practices at TransDigm Group, the United States Government is forced to pay more for parts than it used to. This ultimately costs the government millions if not billions of dollars. Donald Trump plans to get rid of these types of issues.
- Monopoly – Using debt-fueled acquisitions, TDG is working to create a monopoly in the aerospace industry. This adds more fuel to the fire, giving Donald Trump more ammunition to go to war with the company.
Between these two issues, TransDigm Group may really find itself in trouble.
What Investors Should Be Watching For
When it comes to TDG, there is only one thing investors should be watching, that is Trump! Ultimately, if the company can continue doing as it has done in the past, it will be just fine. However, if Citron Research is correct, the company will soon find itself on Donald Trump’s radar, and that’s not going to be a good thing.
What Do You Think?
Where do you think TDG is headed moving forward? Join the discussion in the comments below!