In short: The pitch, at "a fair valuation for the quality you get" — but a Tiny Titans idea rather than a portfolio purchase. Five summary points: "At the core of Perimeter lies a monopoly with a wide moat in a growing end market"; "run by some of the world's best capital allocators"; "as a sector-agnostic acquirer, the runway is substantial"; "the valuation looks fair"; and "the compensation of the Founders can be seen as an orange/red flag". Business: Fire Safety 74.9% of revenue (retardants including the durable, uncoloured Fortify, plus firefighting foams) and Specialty Products 25.1% (MMT medical-device machinery, IMS printed circuit boards, the oil additive P2S5). Moat: years of lab testing and field trials to enter; 9 manufacturing units, owned airbase infrastructure, mobile bases at ~$2m each, $100m+ of inventory; retardants cannot be mixed, so no gradual supplier switch; sole supplier to the US Forest Service; 3% of total suppression cost; price rises of 3–4% a year. Numbers: revenue +18.2% a year historically, +42.3% over two years, >$800m expected in 2026; ex-fee net margin 35.0% in 2025; net debt/FCF 1.8x with nothing due before 2029; CAPEX/revenue 4.9%. Valuation: normalised earnings of $181.7m → 18.5x forward, against a forward P/S "significantly above its historical" level. Capital allocation cited as proof: 12% of shares repurchased across four transactions in 2023 at an average $6, against ~$22 today.
Perimeter makes the red liquid dropped from aircraft onto wildfires. It does not put fires out — it coats the ground ahead of the fire so it cannot spread, buying firefighters time. It is dyed red so pilots can see where they have already been. That business is three quarters of revenue; the rest is an odd collection of unrelated manufacturers making medical-device machinery, circuit boards and an oil additive.
It is the only company that supplies fire retardant to the US Forest Service, and the reasons are physical rather than legal. A competitor would need years of laboratory and field testing to be approved, then would have to replicate nine factories, owned airbases, a fleet of tanker trucks costing about $2 million each, and over $100 million of stock held ready — because during a wildfire nobody can wait a week for a delivery. Different retardants also cannot be mixed, so a customer cannot gradually try a rival; they would have to switch everything at once.
The result is real pricing power, and it comes from an underrated third condition: the retardant is only about 3% of what fighting a fire costs. Nobody negotiates hard over 3% of the bill when that 3% decides whether the rest works. Prices have risen 3–4% a year.
The reason this company is being written about at all is the people. Nick Howley founded TransDigm, whose shares are up 4,800% since 2006, and is now co-chairman here. Will Thorndike wrote The Outsiders, the standard book on capital allocation. Tracy Britt Cool spent eleven years at Berkshire Hathaway, five of them in an office of about twenty people. Five of the nine directors came from TransDigm. The idea is that this is TransDigm again, not limited to aircraft parts. Their track record here is already visible: when the shares collapsed from $14 to $3.30 in 2023, they bought back 12% of the company at an average of $6. The shares are now about $22.
The problem is what those people are paid. They receive 1.5% of all shares outstanding every year until 2027, plus 18% of any increase in the company's market value every year until 2031. When the shares doubled in 2025, that fee cost $435 million — against total revenue of $653 million — and turned the year into a reported loss. It is called an orange-to-red flag, with a pointed aside about someone who worked next to Warren Buffett agreeing to it.
Because that fee makes reported profit meaningless, the valuation is rebuilt by hand: add the fee back, allow for growth and the new acquisition, then subtract what the fee would cost in a normal year. That gives about $182 million of underlying profit, so the shares cost roughly 18.5 times earnings — described as fair for the quality. Note this is a research idea in the small-cap "Tiny Titans" series, not a purchase for the main portfolio.
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