Yet Another Value Podcast - Pershing Square Challenge 2026 finalists on MSA Safety: a hidden quality compounder? $MSA

Episode Date: June 30, 2026

MSA Safety ($MSA) is the "OG pick and shovel" of worker safety: a century-old, pure-play maker of gas detection and firefighter equipment that the Pershing Square Challenge 2026 finalist team argues is a quality compounder the market is underrating. The bull case has three legs. Portable gas detection is shifting to a recurring, higher-margin subscription model, the "canary" that now sings to the whole worksite instead of just the worker wearing it. A legally mandated SCBA replacement cycle is coming that consensus barely credits. And a 2023 divestiture of product liabilities freed up the roughly 17% of EBIT that used to leave the building every year at a zero return. Base case: a double to about $350 by 2030 from roughly $160 today.EJ Karobath, Craig Larkin and Bob McGrane walk through why MSA's owned-sensor hardware is hard to copy (Blackline got taken private, and its devices break if you drop them), how winning a tier-one fire department like LA or Memphis pulls the surrounding towns along on interoperability, and why 50-plus years of dividend growth and a record $500 million buyback point to real capital-allocation discipline. I push back on the obvious tension: this is a roughly 20x compounder that does not scream alpha, the CFO is guiding mid-single-digit growth, and most of the thesis only pays off in 2028 to 2030. Is the market that inefficient, or is this just a very good business priced about right?Team MSA's pitch deck is linked here: https://www.dropbox.com/scl/fi/gv1oj18pawqrmeq7lai4j/MSA-Pershing-Square-Challenge-vYAVP.pdf?rlkey=8l5vkpkr7r26oi0k7wx5fcf0h&st=g4ow2fxo&dl=0This episode is sponsored by Trata: trata.com. Trata is recorded, anonymized conversations between two buysiders who actually follow the same company, about an hour each, with a full transcript. When you are getting up to speed on a name, there is nothing like hearing two people who research it talk it through. Check them out at trata.com.Chapters:00:00 A quality compounder hiding at a market multiple01:24 Sponsor: Trata02:47 Meet Team MSA: EJ, Craig and Bob05:50 Why they picked MSA: an underfollowed, simple business07:50 What MSA is: the "OG pick and shovel" of worker safety10:24 The three segments, and why detection leads11:51 Fixed vs portable gas detection13:15 The subscription shift: the canary that sings to the whole worksite16:40 The moat: durability, owned sensors and a long replacement runway17:21 Market share, and why Blackline got taken private21:32 Fire safety: the G1 and the mandated SCBA replacement cycle23:38 Valuation: a double to ~$350 by 2030, and the reverse DCF25:43 My pushback: a 20x compounder that doesn't scream alpha27:00 Why management sandbags the connected and SCBA upside28:46 A stock for the patient: the J-curve and the long horizon31:47 Primary research: site visits, IR access and r/firefighting36:18 Becoming a tech company: 40% of engineers now in software38:10 The tier-one halo: win LA or Memphis, win the region42:08 Capital allocation: the liability divestiture, dividends and a $500M buyback44:13 Wrap: where to find the team and the deckTeam MSA (Columbia Business School): pitch deck linked aboveLinks:Yet Another Value Blog - https://www.yetanothervalueblog.comSee our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

All right, hello, and welcome to yet another value podcast. I'm your host, Andrew Walker. Today we've got the last, but, you know, certainly not the least, but the last of the Pershing Square Challenge finalist teams. This is Team MSA, and this is a little bit of a different pitch. You know, this is a high-quality company that is trading for a reasonable multiple. So I think you'll hear it throughout the show. They think, hey, this is a company with a long runway of profitable growth,

a few things that have inflected that will either speed up the growth or improve the RIC or maybe a combination of the two. And the market is trading that it's funny to say this now. You know, it's kind of a very high teens to write at 20 times PE multiple. So the muscle is trading it at or below market multiples for what I think these guys are pointing out correctly is a very good business should be very economically resilient. They'll talk about, hey, there's a growth cycle, particularly on the fireside coming that a refresh cycle coming that they think they've got a better handle on that the market is discounting. There's a really interesting math in there. We'll talk right about the end where they show, hey,

they've been winning some of these tier one fire departments and that bodes really well for winning tier two and tier three. So anyway, we're going to get to all that in one second. And of course, they did a pitch. If you want to see the pitch, see the deck, reach out to any of them because these guys are up-and-coming value investors. There's a link to the pitch in the show notes and you can find their contact information in there.

So we're going to get there in one second. But first, a word from our sponsor. And our sponsor today is Trada, t-R-A-T-A-com. You've been hearing me talk about Trada for six months now. I'm a happy member, happy user, happy advertiser for them. Trotta is interviews between two bysiders who are following a company. So, you know, today's MSA. I don't think they have any MSA coverage, unfortunately, but, you know,

you'd get two bysiders who are researching long, short, bearish, bullish, interested on MSA, meta, Google, whatever the company is, they'll get on there and they'll talk anonymized for about an hour, and then they record a transcript and they put it up there. And there's multiple great things about Trotta, but the great thing is if you're researching a company, it's one thing to read about a company. It's another is to get on and talk to an investor who's been following it and has money on the line and will tell you, hey, here's what keeps me up at night, or here's the reason I didn't buy the stock, or here's the reason why I'm considering buying the stock. Like, it's one thing to read the 10K and it's one thing, another thing in real time to talk someone

who's following it because often they have a lot of notes and they have a lot of ideas and a lot of things that you just won't get there from reading the 10K and kind of developing that following to the company. That's number one. And then number two, if you're researching a company and you're trying to get up to speed, going and reading two investors who are knowledgeable on a company, reading the transcript of them talking about the company, there's nothing like it for getting up to speed. So if you want to check out Trada, go to trata.com. That's t rata.a.com to check them out. And look, if you like this podcast, you're going to like Trata. So tarata.com. All right. Hello. And welcome to yet another value podcast. I'm your host, Andrew Walker.

With me today, I'm happy to have on Team MSA from the Pershings, Squared. the Pershing Square Stock-Based Challenge. Team MSA, how's it going? Doing well. Thanks for a matter. Right. Awesome. Well, look, I'm going to let you guys introduce yourselves in a second. Just to start, remind everybody that nothing on this podcast is investing advice. There's a disclaimer at the end of every pod and in the show notes if you want to get into the legalese. So, look, Team MSA, you were one of the five finalists in the Persian Square Challenge. I've said this on the previous episodes, but all the judges told me this was the best set of presentations they've ever seen. So congrats on being finalists.

We'll dive into MSA and the business and how you picked it and everything in a second. But I'd love it if maybe each of you could give me 30 seconds on who you are, your background, all that sort of stuff, just so people can get to know you. And I should note, I'll include a link to the deck that we're going to talk through,

the pitch that you made. And I think you'll have contact information for all of you guys in the show notes. So if people want to reach out, that'll be in the show notes and they find that. But maybe, E.J., maybe you can start just because you're in the top left of my screen. Sure, yeah, sounds good. And so I'm E.J. I'm from Austria and Italy. I moved to the States for college, studied math and physics, somehow ended up in econ consulting, basically valuing patents that are being litigated. And I love the valuation nature of the work. So ended up at Columbia Business School, want to get into finance, whether that's in investing or an investment banking. I'm still working out. But I'll be joining Evercore this summer and very excited to have been part of this competition. We all three of us had a phenomenal.

fun time. I'm, you said patent litigation and you hit the magic words because patent litigation is a very, very common, not common, but among value and event investors on the smaller side, patent litigation comes up a lot more than you think. And I think there are some Liquidia fans who might be using your service in the near future. Correct, maybe you can go next. Yeah, thank you so much for having us on. Prior to business school, I worked at a large cap value investment manager called Focus Investors based in LA. During business school, I'm back as an intern this summer and then hoping to stay in investment management going forward. And thank you so much for having us. And again, it was so much fun working on the stock pitch with E.J. and Bob? Awesome. And Bob? Yeah, of course. My name is Bob McGrane.

Before Columbia, I was in corporate strategy, a little bit of time in investor relations as well in the financial services industry. Came to school back to business school to get my MBA. and look to pivot into the investment space, investment management industry. So, yeah, spending the summer at East Coast Asset Management, which is a long-only. And, yeah, having a lot of fun. Had a lot of fun with this project. I'm excited to talk about it. You know, if we were writing movies and, you know, like made-for-TV movies,

focus investors in East Coast asset management, I have to say, I think that's like the made-for-TV movie villain stock. So I'm sure great guys, but it just strikes me. These are very generic terms. Let's go into MSA safety. This is the company you guys pitched. I'd love to get into the stock and everything in a second, but I think it's really interesting. Like, you guys, this was a class designed for a stock competition.

Part of winning, competing, doing well in a stock competition is selection. And, you know, there might be a great stock that doesn't have a great story. Might lose an okay stock with a great story. How did you guys think about, how did you come on MSA? How did you guys decide to do this? What did you guys pass on? What attracted you just to the, kind of story to spend a semester researching this and building to a stock pitch.

Yeah, I can start and then maybe EJ and Craig if I miss anything. I think in terms of our process for selecting the name, we each kind of individually took a pass at putting together a small list of names over the course of about a week. And I originally found MSA just on a screener. So I was screening for a few things. I think I looked at a certain level of ROIC growth and then just some level of revenue growth and healthy margins, things like that.

And I was also screening for under a certain market cap because I think one of the things that we wanted to do was not pitch a name that everybody already knows and has strong opinions about. And so we kind of wanted to, including ourselves, I think we wanted to come into a story and learn about a business and kind of approach it from an unbiased perspective and and do it that way. And then I think so we each did that, came up with some names. And then over the course of about a week, two weeks kind of debated a few names, looked into each other's names.

And I think what I personally ended up gravitating towards a lot with MSA was it's a very easy to understand business model, easy to describe in a competition setting. And we saw that they had some differentiated products. advantages, and that was easy for us to analyze and really articulate why it could be a compelling story. But EJ. Craig, I don't know if I'm listening to anything there. Yeah, just I think it was funny. We applied different screeners, the three of us, I believe. But I'd say, you know, a couple of names came up in all of our screeners or in any permutation of two of our screeners. But I think the thing after what Bob said, looking into this is we started just reading like the 10.

10Ks and we realized that there was so much discrepancy between what the real story behind this company is and what is superficially glancable based on their disclosure. And we immediately saw that there was much of a story here when it came to like the fact that their portable gas detection is switching towards a subscription model, the fact that there are these very tricky to model replacement cycles for SCBAs. And we just thought that, you know, okay, interesting. We go look at the consensus. It looks a little, you know, could be interesting.

But then we knew to realize there's only eight people covering it. And to Bob's point, you know, this is not a household name. We really feel like at worst we would be one of the top 11 people to understand this company from the outside at worst and ideally a little better. So I think that was one of the things that drew us. We saw that there was an angle there where there's more to it than a disclosure and certainly something that the market might not be appreciating as opposed to the Googles of the world, for example. No, look, from a tactics perspective, I think it's really clever because you guys found a company that is underfollowed, but at the same time, the business model is pretty simple. So, you know, you come to the judge and you come with a super complex industrial. Like one of the things is they spend the whole time kind of thinking about how does this business work?

Like for you guys, you say, hey, they sell safety equipment. People can wrap their heads around it really quickly, but they don't have like a lot of preconceived notion. So I just thought from a tactics perspective, that's great. these types of under the radar stocks, but that are in really good businesses that are kind of mid-signate, they tend to pitch well in these contests just because they're the type of stocks. Everyone can kind of see themselves owning. And it's just, hey, is it quite cheap enough? So, no, I think that was great.

And why don't we kind of just dive in from there, you know, you guys shows MSA, you'll spend a semester researching. What is MSA and why, aside from the stock competition, like, why are they interesting as a business, as a stock? What is MSA? I think one, I'll leave it to Craig and Bob because maybe I'm the one with the more colorful expressions here. But I believe one of the phrases we use during the pitch itself is like this is the OG pick and shovel company, the OG quality pick and shovel company that boasts over a century of experience,

manufacturing exactly focusing pure play on worker safety equipment. And just from the base overview, they have a two-thirds, one-third, a U.S. and international revenue split. And they operate among three segments, that being detection, so think picks and portable gas detectors, fire safety. So think like the protective gear that fireware wear, firefighters wear, including SCBAs, like the gas masks and gas tanks, when they go into burning buildings, and then fall protection. And we thought, and detection is the fastest growing. And between detection and fire safety, we've got 70% of the process. product mix. Craig Bob, anything you want to add there? Yeah, I guess so just to double click, I guess, a little bit on the segments that we found most interesting.

So as EJ mentioned, this detection and then fire safety were the two that kind of formed the backbone of our thesis points. So I guess I can talk a little bit about detection and then Craig if you want to cover fire. So just for detection, that's split up, as EJ mentioned, into fixed and Portable detection, Fix is actually currently the larger part of the business. So that's like you put some gas detector in a data center or some kind of industrial factory that you have, whatever the case may be. It detects the presence of hazardous gas. It lets you know if there's an issue in your refinery or whatever it is.

In portable, these are things that are worn by industrial workers. So it looks like a walkie-talkie, it's a little device that the worker wears. If they're going into a mine or something like that, some kind of enclosed environment, it can say, hey, there's a hazardous gas here. You should evacuate. They are increasingly layering this recurring subscription-based software model on top of those portable devices. So that's where we spent the bulk of our time looking at the detection business because we see a lot of opportunity for share gain there because we think their product in that vertical is differentiated. and they're going to improve their unit economics as they layer that kind of connectivity on top of the hardware.

So we can talk about that more, but just as a brief overview. Look, that was the thing that jumped out. This is slide five I'm looking at in your deck. It was the thing when I saw it. Oh, that's so great. So I'd be happy to tell it, but you guys are the work. Why don't you tell, like, you know, as you said, historically, miner goes in, they have this detected.

There's carbon dioxide or whatever it is in the air, and it beep, beep, beep. Why don't you, that is a product that would get sold? Why don't you tell kind of how it's shifting and how the new products work and why that's the subscription business? Yeah, so the way we described this in the pitch was, historically, MSA likes to say that they put the canary in the coal mine out of business and, you know, their product replaced the canary in the coal mine. So, but now the way we described in the pitch was the canary now can sing to a wider audience. So now, you know, previously the device just alerts the worker. wearing it to the presence of a gas and that's it. Now it doesn't just do that.

It still does that, but it also alerts nearby workers to say like, hey, this guy over there detected some hazardous gas. You should also either check on him or leave the area for yourself as well and to a centralized supervision software. So now what that enables is a few different things. One, safer outcomes because people can come to the workers aid quicker. you can shut down certain parts of your factory, but not others because you have a more intelligent data tracking system. And then you can also automate certain functions on the back end. So like after

an incident, normally there's a lot of manual processes to understand what happened, you know, report it and kind of put it in whatever tracking system you have. Now a lot of that is automated. So there is kind of an economic ROI as well. But the main thing is that it's genuinely making these working environment is safer. And then for MSA, on their perspective, now they can charge a subscription for this connected service, which kind of is a more attractive business model for them to be in because it's steadier revenue and it's more revenue over the lifespan of a typical device

at higher margins. No, look, it's, I'm trying to think of a specific example, and I'm struggling to think of a specific one, but you're going from, I mean, it is very commoditized to say, hey, we've got something that's just going to detect carbon monoxide in the air and go beep-beat. That's pretty commoditized. But once you start talking about going from that to, hey, we've got something that's going to connect to all of the other workers. It's going to pull in the data. It's going to be the data is going to be analyzable by the company and stuff.

Like, once you start going there, that starts to, you start to have scale benefits. You start to have all these other stuff. Recurring revenues. Like, you can just see how that's not going to be commoditized. It takes you into a much more profitable, better place. So I just think it's a really fast. fascinating example. Anything else on whether it's on the replacing the canary in the coal mine or anything else on the MSA business, you guys want to kind of highlight here?

I think one thing just to add to Bob's comments is historically, even though a lot of these gas detectors do have similar functionality, I wouldn't say it's necessarily commoditized. I think that MSA's strength has been the quality of their products and the warranty and their commitment to the market where by demonstrating the strength of their products, customers continue to come back and buy from MSA. And one of the biggest obstacles to adopting the connected variant is just MSA's current non-connected devices work so well. And so we see MSA Plus and the connected variants is building upon the advantage that they

already have in many of these connected and portable gas detectors. And I'm just looking at your slide. I mean, it's a long runway. And as you said, like the unconnected devices, I think they've got half a million sold as of today. It's like $450,000 of them of their unconnected. So there are a lot of them out there, and there are a lot of them to get replaced by these connected devices. I'm looking at slide six, and it shows the competitive base, right? And, you know, again, I haven't really looked at a lot of these, a lot of these safety and detection markets.

I was a little surprised by the revelations of this kind of market share analysis. So maybe you guys could talk to the market share and that'll be helpful for people thinking about the competitors, the share, all that type of stuff. Yeah, of course. So MSA is kind of towards the top of the market share at the moment. We expect that to kind of improve throughout the projection period for our analysis based on what Craig said and what I said about. You know, we think they have a differentiated MSA plus is what they're calling that connectivity layer. They are one of only three scale competitors that have that connectivity layer right now. We think that's going to be differentiating as more and more customers want that layer of connectivity.

So we see their ability to improve their market share through that, as well as what Craig said, which I think is important. I'm glad it called it out because I don't want it to get lost. It's not just that that forms their competitive advantage. it's also the hardware itself. So if you look at some of the competitors, Blackline safety is pretty interesting because they were kind of the first mover

in terms of the connectivity layer. So historically, all these companies have kind of made those portable devices. Blackline was the first to say, this layer of software built into these devices could be really additive. So they have been a pure play-connected detection. provider. They lack what MSA can provide on the hardware side. So we have heard just from talking to

folks in the field that you know, you drop a black line device, it's probably breaking. MSAs are much more durable. MSA also has a pretty interesting advantage where they are the only ones in the entire industry that manufacture their own sensors for these devices. So they are able to innovate the technological capabilities of these devices at a higher rate because they own the whole technology stack from a hardware perspective. Their competitors do not. So not only does that hurt their margins relative to MSA, but they're also behind in terms of innovating the hardware. And so that's why we think MSA is the leader in the space right now and that will only compound moving forward.

And just to add on to Bob's observations about black line safety, I think another reason why it's a pretty interesting example is that it recently got taken private. And, you know, I think what does this mean with respect to the broader thesis? Here we have in economics and investing, there's rare. E.J., I think we lost you. Damn, it sounds like he was about to make a strong point.

He's bad. He's bad. Am I better? Yeah, you're good. We heard investing in economics and then you cut out. And I was just going to sound like a great point was coming. I was just going to say that investing in economics, you rarely have the conditions to have a purely controlled experiment. And here I would say we have one. Black line being a pure play connected detection model being taken private means that there is at least one large, one, you know, PE firm that sees the economic model value of the connected system.

And not only that, but it sees it returning value to shareholders within the, you know, the five to seven year period that PE companies typically have to do so. So we thought that was interesting and also comparing the, you know, installed base that MSA has versus what Blackline lacks. This means that possibly it would translate to pricing power. Like they were black line would have to return value through pricing and that can only serve to benefit MSA. And you know, I just think it's funny how not only in detection, I'll leave it to

correct to talk about this, but there is a series, MSA, MSA benefits from a series of halo effects in detection, it being that people are willing to try out the connected angle with MSA because of the years and decades and arguably a century of reputation, hard work quality reputation MSA has for its hardware. And the same thing goes, and there's a similar halo effect where in the fire safety segment, which Craig is much more informed about than I am. Actually, Craig, that's a great, I do want to move on because I've got multiple questions. I think we've talked about detection up. If it works for you, why don't we quickly hit the other side of the business, the fire and safety side? Yeah, so in fire safety,

MSA has the leading SCBA, the G1, which they underwent a ground-up rebuild of in 2014. And this is really important because instead, their conglomerate-owned peers just made small patches and fixes to the existing architectures. And SCBAs are lawfully mandated to be replaced every 10 to 15 years. And that creates an opportunity for share switches, whereas typically fire departments are very reluctant to switch brands without replacing the entire fleet. And we believe in the upcoming replacement cycle,

MSA will continue to be best positioned to benefit from fire departments, which evaluate SCBAs deciding to go with what is the best product, the G1. And that gives us an opportunity where consensus in the market doesn't fully, appreciate that this cycle is upcoming. And when you look at the way the company discusses this, they've continued to become more open about this cycle. At the same time, they are conservative and say, oh, this might be create some upside or this could be a potential benefit. And this is the same way that they talked about the cycle between 2014 and 2018 and where they saw the same benefit. And going forward, MSA is going to be able to continue to capitalize it in this. At the same

time, they are also taking the MSA plus technology and their product development into SCBAs with Fire Grid, which is their connected variant for the SCBA, implemented by the London Fire Brigade and now with the Los Angeles Consortium of Fire Departments. And this creates another upside that we didn't model into our basic case scenarios, which is MSA for the capitalizing on that software advantage. Great. All right. So I think we've got a good overview of the two sides of the business. Just quickly, I want to quickly talk valuation,

and then I've got some questions I'm going to tack on there, but why don't we talk evaluation just to set the frame for this? Yeah, so I'm happy to talk about the way that we got to our base case IAR, which is assuming roughly 7% revenue

growth rate as a combination of detection outperformance and fire services. The same time, it's really difficult to compare MSA to peers or any sort of Comset because their competitors are different and often own and conglomerate peers. However, the company is trading an historical discount to its price PE, next 12 months PE, and at the same time, as the company and the business improves towards the hardware plus

subscription, we believe they should continue to earn a higher multiple. So our 22 times projected multiple in the base case is roughly consistent with what they are trading at on average, but we believe the market will continue to reward the company for becoming a better business as we look out over the long term over the next five and 10 years. So if I'm just looking at, I mean, this is the base case you guys presented in your deck and everything. It's kind of 2030. You guys have the stock trading for $350 per share. And stock moves around a little bit, but not that much. As we're talking, it's trading for $160 per share in, you know, mid-June, 2006. So you're talking about,

more than a double over the next, let's call it four years is kind of the base case. Cool. Yes. And I think another component to add is also when you look at a reverse DCF, the expectations for the company at its current stock price are pretty low. So it's assuming 3% revenue growth and no margin expansion, which as the connected revolution continues to occur should at least benefit margins, if not continue to grow revenues at a much faster rate and versus what the company has historically done is also not giving the company credit

for their historical outperformance. So let me ask this. I mean, Craig's starting to get into it, but I look at this company and I'm like, oh, and I think you could hear it throughout the conversation with that. I'm like, oh, these are good, interesting niche businesses that MSA is probably the best in and probably like a little competitively advantage. But then I come and look at the stock and I'm like, Well, you know, I think they're going to earn about $8 per share this year, right? And the stock's at 160. And yeah, like, you guys have them growing 7%. I saw the CFO was at a conference two days ago when I was reading the conference to prep.

And he's like, hey, we've historically been a mid single digit grower. We're going to be a mid single digit grower again. We might do low single digits in the front half of this year, but we'll be mid single digits. And, you know, our profits will grow a little bit quicker because historically 30 to 40% of our growth comes to the bottom line. So I hear all that, I'm like, oh, yeah, you know, like this is good in a compounder sense. But I guess the thing that is just like lacking for me, it doesn't like scream alpha, right? I'm not getting hit over the head with, hey, you know, here's the thing like the market is just completely missing. It just seems like, hey, you kind of just like chug along and do well for a while.

There's nothing wrong with that. But just like when I was reading, I was like, I don't like hit in the face with Alpha. So I realize not everything has to hit you in the face and maybe that's not the, but that was kind of what I was looking at here. What would you guys say to that kind of pushback? I think I'm happy to start with two comments and then EJ and Bob if you want to add on. I think first, management has historically been very conservative, as I alluded to earlier. While they may guide towards that, they are not assuming or if any little benefit from the connected variant and the economics that will improve. And we also look at that with the SCBA replacement cycle where management does not like to talk about the upside from the upcoming cycle.

even when you look at the prior cycle. However, this is going to happen, especially because it is lawfully mandated. And so when you read through the transcripts, and I think this is part of the reason why this is an opportunity, it doesn't look super exciting. But when you go under and look at the business segments themselves, the company has performed very well, and it's well positioned to do that. I think the other comment is when you look at a lot of the market's consensus or beliefs around what is happening. They treat both the MSA Plus and detection subscription revenue and the upcoming replacement cycles as a call option or potential upside rather than something that's going to necessarily happen with the business. And so management is also talking about

it in this way while we believe these changes are actively occurring, especially on the SCBA replacement cycle, newer cell site coverage doesn't fully fully. appreciate that this cycle is happening, whereas when you look at older cell site analysts who've been covering the company for a longer period of time, they do give more credit to the company for doing that. And so I think that this is a case where we believe MSA's products are really differentiated in both detection and fire safety, but the market isn't giving them the full credit for that. Bobby, Jay, did you want to add anything on?

Yeah, I guess another thing I would point to a little bit is just the timing of it. at all and I think that this is probably better for a patient investor. I think a lot of what we have uncovered is longer term impacts that will benefit the stock in a longer term. Obviously our base case goes out with five, six years. And I think as we were workshopping this, you know, and presenting it to different investors throughout the semester, that is a pain point that came up a couple times. And I think that, you know, if you think about our thesis points, it's, you know, we're very confident in this kind of connected worker revolution playing into the hands of MSA. We're very confident in the replacement cycle playing into the hands of MSA.

Both of those aren't going to happen next year. And so that's where maybe, you know, as you look at the stock, you're not getting really excited about something that's right about to happen. And these are things that are going to play out over the, you know, 27, 28, 29, 30, that kind of time frame. And so if you look at our base case, we actually, you know, a lot of our thesis points have a very slight kind of negative impact in the early years. And then that really rebounds, kind of J curves into a positive impact in the later years. And so that's just something to be cognizant of, I think, when you think about that mistake. You know, I definitely hear you. And especially, you know, in these markets, it's just like, it feels like it's so short-term focus and everything is just momentum and trading on the quarter and stuff.

And I definitely hear you on like having the longer term outlook. But at the same time, like, it is trading at a pretty rich multiple. And it doesn't seem like growth is like really accelerating. I look at that and say, hey, is the market that inefficient that they're doing these things? And like there is this growth cycle in 28 and are a little bit of growth acceleration, and it's just too far out to discount it, or is it the market just kind of saying, hey, nice business. This is about right.

I just don't know the answer, but that's like kind of the thing I weigh and think about here. E.J. Were you trying to say something as well? Yeah, I mean, I'm happy to talk more, but I think Craig and Bob covered it nicely. I think the long-term horizon that you talk about, you know, I went to use Chicago for undergrad, so I'll never blame that the market isn't efficient. But, you know, it is, it is. many trends that play out over many years that need to happen.

But that Craig said, like, MSA doesn't have to do anything particularly well or the market, you know, trends don't have to particularly surprise in a positive way. And not much has to go well for our base case to necessarily play out is what we think. So, you know, that's what I have to say there about where the alpha may or may not lie. Cool. You guys did, and it looks like you had a lot of fun. You've got your deck is littered with photos of you visiting MSA and different things, and you guys are all wearing fire helmets and everything.

I think my daughter would think you guys are superheroes based on how many fire helmets and stuff you did. Let's just talk to you for a second about the primary research you did. Obviously, you did these visits, you talked to management, you talked to experts. Let's just hear about the primary research you did as part of this project. Yeah, I think this is an opportunity to thank the IR and MSA itself for all the access that they gave us over the months that we spent researching the company. And this is another benefit of looking for smaller businesses in general

is the access that we were able to get. And I think that one of our takeaways from visiting headquarters and thinking through the business was that a lot of the disclosures, and this was feedback that we had heard from talking to other investors as well, were inconsistent or made it difficult to track some of the changes that we are are saying are happening, both in detection and fire service. But when management works through the examples and shows the products and how they're integrating into their customers' businesses, it makes the use case for a lot of these products really clear. Additionally, when talking about

a lot of their investments and their vertical integration in the factories, we're able to learn about some of the advantages they have as a result of this. And we gain more conviction as a result of learning just how much better their products are. Additionally, in learning more about that, talking to customers, especially in the fire service side or fire safety, there's a lot of online documents that we were able to go through and research and find insights into just why their SCBAs are so much better and similarly in detection.

And I think that these were opportunities where we had to go really into the details and have those numbers and our insights confirmed by management through all the conversations we were able to have with them. You know, one thing that you guys have in your primary research, which was unique, and I use these a lot, but I always go back and forth, is you guys had a lot of things from Reddit, and, you know, I'm looking at like Reddit slash R slash firefighting.

It's comments on Reddit talking about, hey, need SCBA advice, looking into early stages, need mask-mask-fit advice, all this sort of stuff. And you guys also have a lot of tracking on the MSA, career board to inform what kind of where they're going and what they're doing. And let's just say, how did you think about doing that research, having it inform your views and all that sort of stuff? Because from my standpoint, like, I'm of two minds, right? It's out there in the public domain.

So is it not priced in? And then, you know, I also think about with Reddit, you tend to get either the people who are like the biggest fans or the biggest detractor. So I'm always worried about, hey, if I'm scraping it, am I getting like a really biased sample on one side or the other? And I know you guys weren't looking for people who are like, Stock Road, and you're looking for people who are actually using SCB-A, but if I've had five people say, oh, this mask sucks,

I'd say, oh, you know, there's 5,000 masks out there. Maybe these are just the five who have weird faces or something, you know? So how did you think about using that, using the scrapes, all the sort of stuff and informing your views and diligently this? Yeah, I've had to talk about this on the SCBA side, and then EJ or Bob, if you have anything to add in detection. I think that we looked at it as a way to reinforce. what we were hearing from the company, from the cell side, and from firefighters themselves,

rather than driving our entire viewpoint. So when you look at SCBAs, I think one of the potential opportunities is, especially not being firefighters ourselves, when we talk about this and practice pitching to other investors, it was that the question came up of how, how is their SCBA actually better or is it really that different? And what we found through Reddit Post was firefighters, discussing how much more they enjoyed using MSA's SCBA, which was then verified by firefighters themselves. And I think at the same time, it was also possible to go out and talk to firefighters. For example, speaking to someone at Cal Fire, which uses the Scott MCBA or Scott SCBA, and hearing that, yes, they might use the Scott SCBA, but they still have had access and experiences

with MSA's SCBA, where they truly believe it is better and differentiated. And so that, that, that, that primary research and looking at Reddit was an opportunity to confirm some of those views and just get more viewpoints on why MSA's SCBA is so much better. Yeah, just to add on to what Craig said, yeah, I completely agree. I think the way we perceive this is in a confirmatory way. I think one thing that management said is, you know, four years or four or five years ago, however many years ago it was, none of our or barely any of our engineers or software engineers, and nowadays 40% of them are.

So that's sort of motivated our, which is just parentheses. This is a company that's very much turning as much into sort of a tech company. And it should be priced as such, which is part of our thesis. But that's a little parenthetical aside. And that's why we wanted to do the job board search. Or another thing that we kept hearing both from investors and from MSA themselves is how much they value this voice of the customer approach and sort of co-developing things with firefighters. And in fact, if I'm not mistaken, one thing that pops up in the one comment that popped up in one of the forums, whether it was Reddit or a firefighter forum, was, man, these guys are really invested in getting to know us, huh? Or some comment like that about how they're almost fanatic about building those reports.

So sort of in a conformatory way like that, like Craig mentioned. That's great. That's great. No, look, it's really interesting because the other thing, E.J. just said it. The other thing that's structure is like, hey, this is a personal. theory of mine, but like old world businesses, AI is going to be the best for them in 15 different ways. You know, they're probably over-engineered and they probably get that. They've got a lot of data that, and we were talking about this when we're starting, they've got a lot of data that

historically has probably been under-optimized, particularly if you're selling to government, that they all of a sudden they might be able to unlock. And like, the customer relationship is still a physical product. Like, AI can't replace any of that, but it just seems like there is a lot of technological upside there. But I might be like two galaxy brain or hitting it too hard. This has been great. Anything else we should be talking about or anything else on MC? You guys kind of think we gloss over? One thing that I, just as we talk about, like, some of the unique work that I think we did,

I think Craig did a really good job of kind of putting together this map of where the big firefighters, or where the big fire stations are across the country and what that halo effect looks like. So he alluded to this briefly before, but we kind of, he kind of uncovered this trend. where, and you can talk about this more, Craig, but like you have Tier 1 fire departments. If you win that, for example, MSA recently won some big Los Angeles area, Tier 1 fire departments, you start to see kind of Tier 2, Tier 3 in the same general area,

kind of adopt the same SCBAs that the Tier 1 fire departments kind of recently purchased. And so we think that's another kind of reason for confidence in terms of MSA gaining sharing the SCBA space on the fire side because they've been winning a lot of, you know, pretty high caliber tier one fire departments. And so we think that. And so just as we talk about different, you know, primary research, unique work we did. I think Craig did a great job with kind of that analysis there. So Craig. That makes total sense. I mean, and it is a great math. I remember this because Memphis is like right in the middle and they're like kind of the only city that's called on the middle. I'd love for it. It makes a lot. It makes a lot. It makes a

sense, but at the same time, I'd love for you guys just to explain. So when I win, let's use Memphis. When I use Memphis, the argument is, hey, that's the tier one. And then all the little cities and towns around Memphis are more likely to kind of switch to my product. You can tell me if I'm saying it wrong. But what's the thesis on why that works? Because on one hand, that makes sense. But on the other hand, like, if I was 3M and Memphis won MSA, I'd still be like, cool, that city, that town outside of Memphis still makes a ton of sense for me to go and try and compete. and keep my product in there. I'm dealing with a completely different buyer.

So I can see both sides of it. What's the theory there and how do you guys kind of think about that? Yeah. Yeah. And so I think that the theory there, which is what happens in the past, in the previous cycle, is an SCBA is a piece of equipment that a firefighter uses every single day. And so in most cases, you're not competing on price. You're competing on functionality.

And the interoperability that fire departments want to maintain. with neighboring fire departments. And so these large city-based fire departments undergo extensive product testing and evaluation where they figure out which SCBA they're going to upgrade to. And these smaller surrounding fire departments don't have the same resources to go out and do that. And so they are both piggybacking on that testing and product evaluation

and also aiming to maintain their interoperability where they can switch out and maintain those units when they're fighting fires that are all within the same area. Is this too crazy? You know, I'm from Kenner, which is a suburb of New Orleans. Is it too crazy to say, oh, if there was a massive fire and kind of like a massive massive fire, the firefighters from New Orleans would be pouring into Kenner to help out. So the interoperability, it's not just like my original thought was, oh, because the guys

from New Orleans might retire out into Kenner and like work two years before they retire. So you want the interoperability like that. But it actually might be a critical safety concern. Or am I completely wrong? and hey, it's too far, you know, New Orleans counter's 20 minutes. The firefighters aren't coming there even in a huge emergency. Yes, you're correct in that firefighters often will cover a large geography, and especially in very large firefighters.

They're pulling firefighters from as many fire departments as they can possibly reach. And I think importantly, going back to the safety element, when you are at a surrounding area of fire department and you see the large city-based fire department make that upgrade, you also want. access to that same technology and the leading edge. And so firefighters themselves are also pushing for getting the access to the best equipment and following on those larger fire department decisions. Fantastic. That's awesome. Cool. Oh, go ahead. Jay. Please. Sorry, just so very quickly, just since you asked anything else, we should briefly touch on, the very last thesis point,

which is that in 2023, their product liabilities. I just, just want to touch on that because I'm putting it briefly, you know, as a percentage of EBIT, they were paying a litigation tax of 17% every year in product liability claims, and which is basically equal to one year of growth capital, whether it's spent well or not, you know, every five to six years. Basically, you had money that was being thrown out at zero percent Roeck, that now is at the very least at positive Roeck. And when we were talking to the company, you know, they said that their priorities are, you know, reinvesting in their products and maintaining their sort of category leadership, beating out their conglomerate peers on product leadership and sort of working on

the durability of their moat there. Share repurchases, dividends, and opportunistic M&A where possible. And, you know, just a few data points there, I want to say, if you model the way R&D has been invested in, both expense and capitalized, and you were to extract, the trend line before the divestiture. You can see there's a step up there. And obviously, we talk about how great the products are. We think that that's going to drive high teens growing into low 20s, Roik. And then secondly, it's got over five decades of experience in growing its dividend every

year. We have no reason to believe that's going to stop. And then last but certainly not least, they just announced their largest ever share re-purchase of $500 million at the beginning of the year. So they're not as fundamental and certainly critical as their innovations in detection and fire safety. But we're seeing that sort of step up function in their competence as capital allocators and not only just as operators. Perfect. Cool.

Cool. Well, hey, guys, this has been awesome. And I think you're the only team where everyone is going into value investing and investing for the summer. So it's nice to talk to people who are actually. I'm sorry to disappoint you. do investment banking. I'm in the dark side. Oh, E.J. But I'm excited for, I couldn't be more excited for that summer, but I can't be more

excited to hear about, to learn, continue more about value investing and see what Bob and Craig get up to. Sorry to disappoint. Well, guys, I hope you have a great summer. This has been great. Congrats on being finalists. And yeah, if anybody's interested in checking out the deck, they'll be a link to the show notes and we can kind of go from there.

Have a good one, guys. Thanks so much, Andrew. A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.