3. Westinghouse Air Brake Technologies Corporation (NYSE:WAB)
Number of Hedge Fund Holders: 52
Westinghouse Air Brake Technologies Corporation (NYSE:WAB) provides railway electronics, positive train control equipment, signal design and engineering services, and heat exchange and cooling systems. Its products and services are used in locomotives, regional and high speed trains, subway cars, light-rail vehicles, and buses. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is one of the best railroad stocks to monitor.
On June 16, Westinghouse Air Brake Technologies Corporation (NYSE:WAB) announced its decision to purchase L&M Radiator, a manufacturer of heavy-duty equipment radiators and heat exchangers, for $230 million in cash. Westinghouse Air Brake Technologies Corporation (NYSE:WAB) aims to expand its installed base and recurring revenue in the mining, engine cooling, and heat transfer sectors through this acquisition. The company anticipates that L&M Radiator will contribute positively to its earnings per share, excluding transaction costs, and expects to achieve significant synergies within the next three years.
According to Insider Monkey’s first quarter database, 52 hedge funds were bullish on Westinghouse Air Brake Technologies Corporation (NYSE:WAB), compared to 41 funds in the last quarter. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 7.73 million shares worth $781.5 million.
Here is what TGV Intrinsic Fund has to say about Westinghouse Air Brake Technologies Corporation (NYSE:WAB) in its Q2 2021 investor letter:
“The second change concerns the American railway supplier Westinghouse Air Brake Technologies (Wabtec). Wabtec took over the railway division from General Electric (GE) in 2019. As part of this, Rafael Santana – who had come over from GE – became the new CEO of Wabtec. The previous CEO, Ray Betler, is one of the best corporate leaders I know, and I particularly appreciated the decentralized corporate culture he embodied. The operating figures have developed nicely since 2019 under Rafael Santana. However, from conversations with current and former employees of Wabtec, it is becoming increasingly clear to me that the GE culture, which is designed to achieve short-term corporate goals, is establishing itself within the company. This culture is not necessarily bad – but it is a culture that does not fit the long-term orientation of the TGV Intrinsic.
Accordingly, I recommended the sale of all Wabtec shares despite the decent operational development. Wabtec is a good example of a distinction between “process” and “result”. In the long run, the right process typically leads to a good result and the wrong process to a bad one. In the short term, however, even a wrong process can lead to a good result. Considered by itself, Wabtec’s financial development since 2019 (result) is not sufficient to make an investment recommendation for the future. Changes in the corporate culture (process) often only become noticeable in the financial figures after several years and are therefore a more meaningful indicator of long-term operational development than short-term historical business development. Accordingly, my discussions with current and former Wabtec employees about changes in the corporate culture are the crucial reason for the sell recommendation, as I assume that the GE culture will lead to worse operating results in the long term.”
