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hi everyone welcome to clone compounding where our mission is to learn from others in order to achieve Financial Independence in today's video let's take a look at one company that seems to have become a favorite of a few big super investors in Q2 2023 the company is Garrett motion ticker symbol GTX sq2 data from various super investors got released we can see that GTX stock has been purchased quite heavily by two really big super investors Howard marks and Seth clarman what do these two legendary value investors see in Garrett motion in this video let's take a look at this company and why super investors might be taking a large position on this company let's get started Garrett motion the company Garrett motion was formerly known as Honeywell transportation systems and Honeywell Turbo Technologies it is an American company primarily involved in engineering development and manufacturing of turbochargers and related induction systems it is a technology provider that enables vehicles to become safer more connected efficient and environmentally friendly it mainly produces parts for ground vehicles from small Passenger cars to large trucks and industrial equipment and construction machinery in 2004 the business became part of American industrial conglomerate Honeywell International as their transportation systems division in 2018 it was spun off to become an independent company under the Garrett motion name with corporate headquarters enroll Switzerland spin-off from Honeywell and bankruptcy Garrett has a checkered history it was spun out of Honeywell in 2018 with a mountain of debt and an asbestos liability that is entirely unrelated to Garrett's operations though the business was doing fine it slowed considerably in pandemic strick in 2020 management seized the opportunity in September 2020 to file for chapter 11 bankruptcy reorganization seeing the value of the company a private Equity Firm quickly entered a stocking horse bid for 2.6 billion dollars for the company following a competitive auction Garrett emerged from bankruptcy only a few months later in April 2021 in doing so the company restructured its debt and limited its asbestos liability with Honeywell turn around turbochargers aren't like any old highly competitive Auto Part they are highly engineered devices that require detailed specifications designed into each model that intimate knowledge of each customer's product has built up significant trust and barriers to entry for any company trying to break into the turbocharger business over the decades the turbocharger Market has evolved into a duopoly between Garrett motion and auto supply Behemoth four corner by the end of 2021 things had turned around for Garrett in a demonstration of its confidence in the company's future Garrett's board authorized a 100 million dollar share repurchase plan in November valuation the company has a market cap of around 2 billion dollars in Q2 2023 with a revenue of 3.8 billion dollars and free cash flow of around 284 million dollars during full year 2022.
in the latest Q2 2023 earnings free cash flow produced was 140 million dollars so the company is today trading at less than 10 times free cash flow this can explain why super investors might be interested in this company but the company has risks as expected the trend toward electric vehicles could harm the company because EVS don't use turbochargers Garrett would counter that by saying that hybrid cars use turbochargers and sales of new hybrid vehicles are estimated to grow 29 annually through 2030 to 1.7 trillion dollars the company has also been investing in the EV space with its Automotive software business Garrett software is used to bolster performance of EV powertrains its software also offers predictive maintenance cyber security and advanced control tools to Connected vehicles for now that's it from us hope you enjoyed and learned from this video smash that like button and subscribe to receive more videos on memos and write-ups from top investors thanks for watching
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