The Misfits: VSE Corporation (VSEC)

A familiar business model for a small cap aerospace & defense company, but one that could look drastically different in a few years.

An Arms Merchant in Tangiers, Gyula Tornai, 1890, oil on canvas

Do you ever hear a song for the first time and say, “Man, that sounds familiar,” only to discover it’s a cover or heavily samples another song? I felt the same when I first looked at VSE Corporation (NASDAQ: VSEC). Every business segment had me drawing parallels to, in my opinion, some of the most underappreciated wealth-creating businesses on the market.

VSE has certainly held its own in that regard. I don’t think too many people would say no to a stock that has run laps around the broader market over the past 30 years as well as VSE has.

For all the good VSE has done for its shareholders over the years, management is in the midst of a significant portfolio transformation. When I hear a wealth-compounding company talk about transformation, I can feel the hairs on the back of my neck stand up (unfortunately, there are more of those these days). If management is willing to rock the boat, it better have a good reason.

Let’s look at what has made this relatively small aerospace & defense company produce such spectacular results, why its business model resembles other great investments in other sectors, and whether this portfolio transition is the right thing for investors from here.

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