No. of Recommendations: 28
While this is about RTX, I think you might see some similarities with Berkshire ;-)
Today, Raytheon Technologies (RTX) reported strong earnings, sending its stock soaring to a record high. But this isn't about today's headlines; it's about the conviction required on the worst possible day 24 years ago.
Our initial investment was in United Technologies (UTC), the predecessor company that eventually merged to form RTX. We executed the purchase on September 10, 2001. In hindsight, it may have been the most perfectly disastrous timing imaginable.
Less than twenty-four hours after the trade settled, the world changed. Following the terrorist strikes on September 11th, the U.S. stock market shut down for four trading days—the longest closure since 1933. When trading finally resumed, the panic was palpable, especially in the aerospace sector.
Due to UTC’s substantial exposure through its Pratt & Whitney engine division, the stock immediately plummeted by more than 30%.
Air travel demand evaporated overnight, paralyzed by safety fears and new, stringent security procedures. U.S. airlines scrambled to ground significant portions of their fleets, sending aircraft into specialized desert "boneyards." Consequently, airlines canceled and deferred vital orders for new aircraft and maintenance, effectively eviscerating UTC’s commercial aerospace volume and orders.
With the initial investment seemingly wiped out in a moment of national crisis and economic chaos, the impulse was to sell. But that's when the quality of the investment truly mattered.
We held our position, not out of stubbornness, but because we trusted the fundamentals: UTC was a diversified, high-quality business with best-in-class management and a rock-solid financial position. Its other segments—Otis elevators, Carrier HVAC, and its growing defense work—provided a crucial ballast against the collapsing commercial aviation market.
Holding the line through that uncertainty was the hardest part of the investment.
Fast forward 24 years, and that conviction has been handsomely rewarded. That initial investment has grown from a split-adjusted $18.25 per share to more than $170 per share today.
This demonstrates an important lesson in long-term investing: You don't have to get the timing right on a high-quality stock. If the business is fundamentally strong, patient conviction and a long-term horizon will ultimately conquer even the worst possible start.
