Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on affle Card playing Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
I'm looking at that oil deal a diamondback buying endeavor. You have bangstock, which is diamondbackstock. It is up by ten percent. Wow, that is a really nice move. Vince Piasa is Bloomberg Intelligence Senior Energy Research analyst, and he joins us now vinced you like the deal.
I think the deal ticks all the boxes that we're going to need to see in this MNA wave. In the permium, it grows diamondbacks, acreage, it grows locations, so inventory is not going to be an issue in terms of the that they paid. Look diamondback in my universe of coverage, it was the highest had the highest premium. So they're using their multiple to get this deal done and so elevated currency along with some.
Cash and debt they are They do have a fairly low leverage on their balance sheet, so I think this picks all of the boxes they'll throw off significant free cash flow in twenty twenty four and twenty twenty five.
So in terms of paying off whatever bank loans that they're going to take on for this, I think it works out extremely well, and you're seeing the response by the investors in the marketplace. It also works out for the founding family of Endeavor. They get to monetize decades of hard work.
So, hey, I've got a question with that. I mentioned that this is a merger of equals, and I got kind of laughed at, like, there's no merger of equals and it comes to M and A, but in this case, like is there though?
Well, in this case, think about what Endeavor brings to the table. It almost doubles of diamondbacks Midlan acreage, and it brings sizeable oil production for the broader diamondback franchise.
So I would tell you that in terms of size, it is a merger of equals, but the family will get roughly thirty percent of diamondback with selling off almost half the resource to diamondbacks, So it basically doubles diamondbacks total size, and the founding family gets about thirty percent of the new diamondback.
Let's say Vince are there any regulatory issues here. A lot of M and A going on in this space here.
Yeah, you know it's going to get a looked at. So Southwestern and Chesapeake getting together out in Apalachia, that's a gas deal, but that will get a very very clear look, a very very deep look by the regulators. This will as well. I don't see why it wouldn't because of the actual size of this entity. It's going to be an enterprise value of north with sixty billion. It will be the largest Permian pure play, So it'll
get looked at. All these deals will get looked at, and it'll take a deeper look, same as Southwestern and Chesapeake.
I was talking to Jenrey this morning. She covers Anti Trust for Bloowberg Intelligence, and she's like, yes, like all of these are going to have to get looked at. They're particularly interested in the exon Permian Pioneer deal and that all these deals are definitely gonna have the FTC
sort of wide eyed looking at it. But you have to wonder, though, if they want more oil, they're going to have to do it, right, Vince, I mean, it's gonna I'm just trying to think of, like what the rational will be to block and say this deal, but like let Excell Pioneer go through, Like you can't.
This deal is much more North America centric, much more North America focused. So when you think about you know, Exon and Pioneer Pioneer fits within Exon's Permian portfolio. But Exon is a large, integrated multinational franchise. This is more US centric and Permian centric as well. But look, they're all going to get looked at. It is what it is. This is a very large transaction. Like I said, Southwestern Chesapeake is getting looked at. This will get looked at
as well. It's an important resource. What you have here, though, is you have resources now in stronger hands. You have Exon, Mobile, Chevron, you have Diamondback. You have very large entities with big balance sheets and the capability to take down even greater levels of capital in order to move production from the delineation phase into the production phase.
So give me a sense, Vincent, I'm putting my banker hat on. Can I keep doing a bunch of deals here? I mean, how many players are left?
Yeah, it's a very interesting question. So we put out last year the top twenty private privately held PE sponsored names in the permian, in this case Endeavor being the second largest Mewborn, which has mentioned that it wishes to sell. That's the largest of the top twenty that'll go out, we think, because it has been mentioned as a takeover candidate. Similar situation Founding family looking to move the assets. If you think about the top five, three are now gone,
so there is a great deal of interest. There's interest by the private players as well, especially the PE sponsored players. Your gay being close to these vintages that are aged and now this capital needs to be recycled, so you will see more of that. You will see public buying private. Public does have the currency. In the case of Diamondback, they had a premium multiple elevated currency that they were
able to use to monetize the Founding families investment. And you'll see that as well, especially in the permium, where you do have this difference of large cap premium valuations looking for assets and the smaller cap names trading at a relative discount to peers, but trading at a discount to the larger names as well.
Well.
Well, that's really the thing. Private equity being like, oh, thank god, we can kind of get these things out there. Is a vincement. I also found interesting I was reading through some of your research on this just to get more background on some of the private players, is just how much these private guys have been responsible for bulk of the drilling. And in some ways it makes sense, right shareholders want the big guys to become capital discipline.
They're public, they got to report, so therefore they have to be capital discipline. But a private guy doesn't have to do that. They can do whatever they want. Walk me through the importance though, of these guys within the shell development.
Yeah, so we tend to think that the private players have been responsible for at least half of the production growth in the last few years. What we have seen is these privately sponsored players putting out that production growth to entice the public players to buy that asset. And what the public players tend to do once they integrate that asset is to slow that production growth down, remove the rigs from that private player, and generate cash flow.
This enhances free cash flow and allows the public player to pay down that debt to push out payouts, give it ends or stop buybacks to the investment for rewarding them sticking around post a deal. So that's what we've seen production growth by the private guys. Public guys come on in, buy the asset, turn down the volume, ratchet down the speed, generate that free cash flow so that the balance sheet, so that the income statement looks stronger post a deal. And it's been working for the last
couple of years. And that's why you see such a great reaction in the aftermarket whence these deals are announced, especially this deal, and also if you take a look at some of the gas deals that have been done as well.
Hey, Vince, as an investor, do ike care about where the rock is located? As Pennsylvania shale better than Texas Shale's who whoa whoa?
Yes, yeah you care?
You care?
Tell me, yes, you care? You care? Because when you're selling a commodity, concentration drives synergies, efficiency and productivity, but especially so in places like elegacy play like the Permian,
or in places like Appalachia or in the Hainesville. Interestingly, these last few deals that we've seen, we've seen in those plays, those prominent legacy plays, those proven plays where you have a lot of runway and you can buy these assets, integrate them, grow that concentration and generate those efficiencies, generate that productivity going forward.
Who's next? Who's the next buyer?
You know what, I will tease the audience. Go on to the terminal, look up our research. We put out a piece highlighting the twenty private private sponsored E and p's in the Permian. We go through that list. Mewborn has been mentioned, so we can throw that name out there, but there are plenty of names in that top twenty list that seem to be putting themselves in a position where some type of capital event could be announced.
Events great stuff. Really appreciate it. Deep teas there, everybody. Check out Vincent's research on the Bloomberg Intelligence on the terminal. He's Bloomberg Intelligence senior Energy research analyst. You have to wonder how many buyers they're going to be right.
So rock is not rock, Rock is not rock?
Well, rock is rock, but some rock is better than other rocks.
Some rock is better than other rock.
Definitely.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Otto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg eleven thirty A.
Great, great game, big, big platform for advertisers, arguably the biggest day of the year for the advertisers.
The question is these seems even work?
I mean as it worth. It is a worth seven mili plus whatever your production.
I was not impressed.
I thought some good ones, some some ads were good.
I like to don't donuts. But there's some people who actually measure this as a business. They don't just watch it. They measured as a business. Our next guest Kevin Krim. He's the CEO of Entertainment Data Oracle. Kids call it EDEO. He joined his live here in our Bloomberg Interactive Broker studio. He knows his way here. He's been in Bloomberg before. Kevin, thanks so much for joining us here. We really appreciate coming in. I thought there was some pretty cool ads.
From your perspective, What are brands trying to do here at the Super Bowl and how do they measure if it even worked or it was successful?
How do you think about it when marketers are thinking about what they're trying to achieve in any marketing, but especially on television, which is at the top of the
pyramid of value in advertising. At the very pinnacle of that peak is the NFL and the Super Bowl is at the absolute top when we've measured, we've measured nine super bowls now, and what we're measuring is the consumer engagement with the brands or products being advertised and any marketers trying to achieve awareness and then engagement with their brands.
And we're measuring engagement as searches and branded website visits, app usage, the kind of digital behaviors that are predictive of sales lift, but they're immediate and they're easy to collect large amounts.
Of what's the time frame for that? Is it like right after the ad airs? Is it in the next twenty four hours?
Most of that engagement happens within minutes of the ad airing, But because of streaming, because of the ability to DVR or tvo it, you do have a tail to that. And we'll see activity for a week or more after a big ad airing like like the Super Bowl, And when we see what kind of engagement is driven relative to what else you can get on TV, like let's say an average thirty second spot on primetime broadcaster cable, the Super Bowl does many, many, many multiples of that.
We're talking the average advertiser would have to buy hundreds of those thirty second spots on regular primetime to get the same impact as a single area on this So on a dollars basis, we find that the Super Bowl is a very good rational decision for most marketers. But then the pressures on the creative, and the creative has to be strong or you're not getting your money's worth.
And that's where you know. We saw ads yesterday. Some of them were fantastic, others I think played it too safe, and you're going to see quite a range in how much engagement is driven from those ads.
So from your perspective, maybe from the data's perspective.
Yeah, a winner or two?
Which one did you?
Let's talk about real quick. The top five Number one was Deadpool three number two.
I have thoughts on that because I'm a huge deput person. Love it, but then again, he could come on, Ryan Renns could come on and say hello, and I'd be like, that was brilliant, that was amazing.
It was a fun spot and the tease of having Wolverine joining him is very satisfying for any Marvel fan. Number two is the film that adaptation of Wicked. Another interesting teaser Ariana Grande in one of the starring roles there, So that's going to pick up a lot of attention. And then number three three was the Volkswagen ad that you know of harkened back to their heritage of bringing the Beatle to UH to America and then it teased their new all electric UH bus, so the VW Bus
returning to America after a long long gap. Number four was Team or Temu as we all learned was how to pronounce it? Last yesterday they ran six spots between pregame, in game, and postgame. Six spots. That's a huge investment. But this is an interesting one. A lot of people's opinion of that kind of spot would say that it was one of the worst.
And you know, actually, it doesn't even resonate with me. What what what is it?
Coppening? It was, it's a it's a mobile shopping app and uh. They they started their first real kind of advertising in the US was last year's Super Bowl. That kicked it off. They were one of the most downloaded apps in the Google App Store and the Apple App Store all of last year. They followed up with a bigger bet this year, and it.
Is discounts are insanity like it like if you go on there, I mean you have to measure, like what am I actually buying? Like there's that conversation we had, but the number price, it's it's unreal. And there's like extra deals like it's it's huge.
Temu and Shine or Sheen, I'm not sure how to do it properly. Are both China based apps that are about these giant discounts and are very popular apparently with with Barbain discount shoppers.
How about Booze.
You know, we saw really interesting. We saw no liquor ads this year. We saw a smaller number of beer ads than last year. What we did see was some top performers were soda ads, and we had Poppy in our top five. Hoppy is this new? Yes, premium priced? Would you call it? Like kind of like more popularized kombucha maybe.
The way without the fermentation, Like I'll get poppy to my daughter, but you can't have ka.
Right because it's trace mounts of Alcoholah, so it's got slow sugar supposed to be good for you and two dollars a can. Oh so the margins are incredible. It's an independent soda company from Austin, Texas, husband and wife founders, and you know, they made a big statement in popping into the top five. That's gonna lead to a big lift in their sales. I mean we can say that with total confidence whether that stix or not is alex
Is saying it's it's it's it's good. So you know they may have a shot at.
Being a to Okay, how about nostalgia In the nostalgia driven TV reunions, a lot of reunions, I would say they were a mixed bag and sort of in terms of performance.
I loved most of those spots. I mean, the Duncan spot was in our top twenty. That was probably the best performing of the nostalgia based ads. We saw Jennifer Anison and David Shwimmer reunite and.
The Uber eats like that one.
I thought that was a fun moment. Yeah, it was a fun moment, you know. But again, Oh, and I'd say the other top performing spot we had the parks and Rec several of the leads in Park and Rec, in the in the in the app for in the ad for Mountain Dews, Baja Blast Soda, and that was a lot of fun.
Interesting and we had to you know, I like you putting in your notes here that streaming is the new syndication. Yeah, that's where shows go to live forever. And one of the examples and then maybe become popular again. One of which is Suits, Suits, which is all over my social media feed and I never even paid attention to it when it was on whatever network it was years ago, but they're making a huge comeback, right, So.
That was NBCUniversal originally, I think it was USA Network when in its first run the top streaming series on Netflix for last year, and you saw the Suits stars and a bunch of other stars from a bunch of the series that were hot maybe fifteen twenty some years ago and are now top streaming series in their sort of rerun stage on what it's Pea Cock or Netflix or or others.
What else did out to you? What was like a wild factor?
Yeah?
I mean, I would say besides those those things that we talked about, I would say the automotive category was really interesting. All the ads outperformed the average. They were all import or foreign automakers. They were not any of the Big three and from Detroit, which is very unusual.
Was was that a did you hear anyth coming out of Detroit saying hey, we're just.
You know, I didn't talk directly to all of them. Some of them are my clients. I'll be discreet, but I would say what I heard loud and clear. From the industry overall, you've got to have the right product to launch. You don't want to have a disruptive supply chain when you're when you're doing a big Super Bowl ad, it usually is best to use a Super Bowl as the start of a big campaign, So to launch a
new model is key. And then, yes, if you're coming off of bruising, you know, negotiations with your unions, probably one of the better things to do is maybe just sit it out, wait till next year.
Well, what's their messaging. It's like, hey, guys, you know the we're still making them. You should buy one, but we're also gonna do these ices and these are really cool. Go buy those like It's like they're enough, We're gonna do all that money over there. I mean, it's a pretty tricky line.
It's a tough balancing so to sit on the sidelines for this year smart move.
Were you surprised that we didn't see any price inflation this year from last year. Seven million dollars for a thirty second spot. Usually we've seen you know, mid single high single digit inflation year to year.
You know, I think it's it's it's a challenging market as we shift from traditional to streaming. But I would say anyone who bought an ad from CBS this year got a fantastic deal, right, I mean, you know, it's the super Bowl always performs consistently. But on top of that, you had the Taylor Swift effect and you can't plan on her team being in the super Bowl. That's that's
a bit much. But just if you were sitting there last September as the season got started and you made a commitment to seven million dollars, you you had a good hunch that this would be a sustainable positive effect, a tailwind, if you will, for the whole sport with Taylor involved.
All right, good stuff, Kevin Krim, thank you so much for joining us. Kevin Crime to CEO of Entertainment Data oracle Edo, joining slave here on our Bloomberg Interactive Brooker Studio.
You're listening to the Bloomberg Intelligence podcast Catch US Live weekdays at ten am Eastern on Apple car Play and then broud Otto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch US live on YouTube.
So SMP five hundred, like you were saying, right, fifty twenty eight, and I take a look at the strategists call for this year. The average is forty eight sixty seven, the median forty nine fifty, the high fifty two hundred, the low forty two hundred. So it's like either a lot of people are wrong, We're gonna see a lot of upgrades, or we're just gonna have a crash out at some point, which is quite of interesting.
At the end of the day, it's all about making money. So you do the earnings analysis on the S and P five hundred, and the earning surprises so far this quarter of those companies that have reported is something like eighty percent at this point, so it's impressive.
Yeah, you can make the argument that it's legit, and then it's actually broadening out to a certain extent. Let's ask Kim Forrest. She is founder in CIO, a book of capital partners. Hey, Kim, I take a look at the strategist notespend for this year where we're trading at right now? Is this a crash up, a melt up? Does it continue or is it fundamental here at this point?
Well, I have to say, I think people by and large are kind of terrible at forecasting, as we saw last year, and maybe this is more of the same, right And I think I think it's going to be a crash up, I have to say, because the markers have slow down, or more than slow down, are just not there right So, and we'll see tomorrow and this is a data rich week where we have more earnings, but probably most importantly CPI and then retail sales to see if the consumer continues to spend, but we believe.
It they do.
They do, so why not and the year above five thousand? I think that's a good call at this point.
Why not own the magnificent seven? Why not keep buying them today?
Is this AI thing real?
You've got a perspective here, don't you.
I think the AI thing is real. I have to disclose this. I was a software engineer working in AI before I moved on over to the world of finance as a cell side equity analyst, and so have I know of which I speak, so Kimba, it is for real, but it's never going to play out the way investors think at the beginning of a rush, right, they think in Nvidia and Google and Amazon and all the rest of the Magnificent seven are probably going to be winners.
I think they are going to win, but there's going to be other more nuanced AI applications that come in and it might be the killer app I.
Mean, I'm looking at in Vidia here, up forty eight percent year to date, two hundred and fifty trailing twelve month basis in Nvidia overtakes Amazon and market value Bloomberg News just across the tape here, do I just keep buying these chips?
Is the chip? Are chips the way to play this?
I think chips are, But I don't know that in Vidia is our final winner. If you notice, there's a theme in chip land, and that is to make chips that are as good as in Nvidia, but maybe not cost as much. Even Sam Altman, although he's kind of a dreamer, that's the chat GPT guy, you know, he's really going all in on trying to design his own chips and getting people, you know, interested in funding this new company. But I think that chips are a way to go and it's going to allow for a more
as I say, nuanced approach. You know that we're going to have to collect data and chips are the way they do that to put into these models. So I think chips by and large or a winner here as a sector.
So Kim for individual names, then how do you play it if it's not going to be in video?
Sure?
Well, I mean I remember I think in Vidia wins. But does it continue to like double quadruple. I don't know. I'm thinking no. So the next two closest competitors that may have a product that can help, you know, people build these large AI models at a lower price are both AMD and Intel. Now they've been known for PC chips and that's been dragging them down, but let's give them credit for coming up the curve and serving this market. I think that they have a good shot to do that.
Kim.
We're about to a little more than sixty percent of the way through the S and P five hundred reporting earnings. Any themes for you either plus or minus coming out so far?
Sure, I think the smaller companies are looking more interesting to me because of mergers and acquisition. Potential mergers and acquisition completely dried up in twenty two going into leaving twenty two into twenty three, and it's largely because we were in a rate hike cycle by the Fed. And now that we seem to have reached peak interest rate, maybe that is what is bringing people back into M and A. And I think looking for high quality companies in niche markets is another way to go.
So this doesn't be like a by the Russell here at this point, wouldn't.
No, No, not at all. You're there's a whole lot in the Russell. Look for those companies that have product management that are creating and delighting their customers, and that might go well with a larger company that needs that niche product.
But by takeout targets, that's that's tough, isn't that. I mean, that's that's a tough one.
It is, but it's exciting.
It's what were you here?
Fair enough? Okay?
So Kim, are there any other sectors out there in the market you're looking for or are there factors that are kind of driving your process these days?
Well, we take a kind of weird approach where we say we are stock pickers and mirror the S and P five hundred with our picks with respect to sector waitings, So putting that aside that we're kind of sector neutral, I think it's really interesting. Tech is big, and I think you should stay concentrated in that, but I'd also look for some unloved areas, kind of like consumer discretionary. You know, at the top of this segment you pointed out most of the strategists think we're going to, you know,
go backwards from here. But if the consumer keep spending, why not look at names where the consumer is spending and that they are gaining market share.
Like where Kim, well, retailers.
Are a big fascination of mine, and we're gonna at the end of this earning season hear a lot more from them. I don't really want to trot out any of the names because I have smaller names in that section, but yeah, I do like retailers, and I think they're very much unloved at this point, given you know, we're all looking for that poolbacker softness to occur this year.
All right, Kim, thanks so much for joining us. Really appreciated. Kim Farest, founder and CIO of Boca Capital Partners, located in Pittsburgh, Pennsylvania. So good stuff there.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
And you got the dow of two hundred points. I'm on forty thousand. Watch there were thirty eight eight hundred. So I like those nice round numbers. We eclipse five thousand a couple days ago in the SMP sixteen thousand on Nasdaq, So I like some round habers there. Yeah, and why not? But I know the pros do it, and you know, do a little bit more analysis than that than just no.
But honestly, if you just bought like an ETF for NDS, you'd be fine.
All right, Let's check in with Jennifer Apple. She is the founder and portfolio manager of Alpine Peaks Capital. She joins us via zoom from New York. Jennifer, what do you make of some of these heights we're hitting here on these markets? I guess it really you know, started this latest leg back there in November December last year, kind of continuing into this year. What do you make of these markets and these levels.
Yeah, Hi, good morning, Paul and Alex, and thank you so much for having me. It is really interesting we saw this strength. I think it was really signaled by the Fed signaling, you know, especially in early December, that
they were going to start cutting rates. They baked in about three rate cuts as you guys know for twenty twenty four, and a lot of commentators are expecting more and see a lot of that optimism, I think get priced into the market in December, and so it was interesting in early January to see some names pull back a little. We definitely saw some market volatility, which I
think is healthy by the way. It offers us all opportunity today though as we're starting to I mean, it will be interesting tomorrow we get the fresh inflation numbers, so that's probably the best indicator of what the Fed is thinking to do. But you know, so far, as you were just pointing out, companies have been putting up pretty good earnings as they posted for most of them
their fourth quarter results, and so that's definitely positive. It's always interesting for people like myself to hear companies actually report their outlooks for twenty twenty four and to get that guidance. I think there's a lot of speculation as to what companies will do, but it's always it's great to hear it from the horse's mouth and actually get the outlook from these companies.
So, Jennifer, we've seen the rally sort of broaden. I appreciate that the equal weighted indext for the SMP and had the breakout that the S and P has, but the russels up there industrials, healthcare for the SMP, we're doing really well as well. Do you buy the rally breadth is good or the rally breath is bad?
Yeah, it's an interesting question where you have some some real breakout strength continue and a handful of names. But I think the economy and certainly lower rates will be good broadly for the economy. So it makes sense to me that we are seeing us more broadly, and that is something that I would expect to continue. Obviously not universally. It does matter what's happening on a company specific level,
and you do have winners and losers within that. But I think the environment should be supportive for the breadth of the valley, if you will, So, how.
Much or how important is this feeder reserve for you and your investment outlook here, I kind of feel like, you know, the market's really just trading on where the FED is going. I'm not sure there's paying as much attention, perhaps to the earnings as we typically do. You view the FED and it's impact on the market.
Yeah, that's such a good point, and I agree with you. It's interesting. So we have a five year average building pread, and so we are taking that longer term view and thinking about our companies across business cycles rather than just what next quarter will look like. But I do think that a lot of people are focused more on the FED right now, and particularly getting excited about the prospects of perhaps accelerated rate cuts. We don't think that will
happen as quickly as some people do. But nonetheless, even if you take the two to three cuts that are kind of at the bottom end of the outlooks, that's still helpful for this coming year. And so it's interesting that we do see as companies report earnings, we do see them revert more. I feel like there can be a lot of momentum and excitement priced into names intra quarterer, but we do see them return to typically return to trading on their own individual outlooks as they were poort earning.
So that's always a particularly esteem moment of truth for us.
If you will, you have some cool companies that you look at Rolins If I said that, right, Roland Rollins, Yeah he did. Yeah, Pest Control Services, which is take r L walkers through while you like this one?
Yeah, absolutely so. They are the leading pest control independent pest control company in the United States. Their largest competitor, termin X, was just bought out by a UK company called rental Kill last year and leading love yes, okay, yeah, And it's just a it's a compelling time in the industry for there's a few broader macro reasons, if you will.
Global warming is supportive of past populations. Demographic demographically too, our generation and younger generations are more likely to hire somebody else to deal with pests rather than do it yourself, as the baby baby boomers tended to do. And so we're seeing oh go ahead.
No, no, go ahead, continue, okay.
Excellent, So it's a you know, it's a good environment for the pests, if you will. And it's a time where Round two Kill has always been a really strong
competitor in the area. They have really powerful door to door sales, have been investing heavily in technology, also a very clean balance sheet, and that's enabled them to typically add between a third and half of their growth from acquisitions, and so they continue to roll up smaller pest control companies, share best practices with them over time, be able to really improve margins there. It's created a very positive dynamic. It's also making an interesting transition now from being a
family dominated company that Rollins family. Actually they just sold off a portion of their stake, but they still own over a third of the company to bringing them. Last year was the first year that professional, a non family member was appointed CEO. And so while if Rawlins family has done a great job building the business, I think there is a really interesting switch to a little bit more of a bottom line line focused perspective right now. There.
We've had a aviation when we talk about Boeing, and it has been in the news not for the good reasons. You have a manufacturer of aviation parts, Hiko HgI is a ticker what's tell us about that company and why you guys like it?
Yeah, absolute, So they're a really interesting company. They make what are essentially generic aftermarket aviation parts. So it's almost akin to generic drugs if you think about pharmaceuticals, but in this case. So they take what's called an om part or original equipment manufacturer, and they reverse engineer it to be made out of the same materials, to be able to meet the same stress tolerances, to last just as long and has similar quality, and then that's approved
by the FAA. It's called Parts Manufacturing Authority or PMA is the acronum used in the industry, and then by each individual airlines. And airlines like these parts because they typically sell or starts at about thirty percent less than the OEM price, and that can widen out to as much as seventy percent over the year with volume discounts, and so it's a great way for airlines to save money.
And Iiko's really the dominant player in this area. They just bought actually their largest competitor, called a Wendcore, and it's a space they know really well. It's adding about thirty percent on revenue to the company this year and It's a very exciting time for them, you know, taking the recovery and air travel that's happened post pandemic over the last couple of years, and then market gains they've made as they can help airlines improve their own economics.
Jennifer, great stuff. We really appreciate you joining us. Jennifer Oppold a founder and portfolio manager of at Alpine Peaks Capital. Quite interesting.
This is the Bloomberg Intelligence podcast, available on Apple, Spotify, and anywhere else you will get your podcasts. Listen live each weekday, ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.