Postmortem: Blue Bird Corporation

Entry Price: $36.1

Exit Price: $50.4

Return: 40.43%

Alpha Contribution: 2.78pp

Hold Period: 186 Days

I'm really proud of the work I did on Blue Bird and how the position turned out. There's two lessons that stand out to me most when looking back at what allowed BLBD to be a successful position.

Clear, Measurable, Thesis

I believe the biggest strength of the BLBD thesis was that it boiled down to them delivering more volumes than the market expected. We believed that funding from the government would remain intact (which it did) and that the replacement cycle would begin to show signs of occurring (which it is). Because our thesis was based on BLBD increasing volumes, I was able to see if they beat volumes expectations each quarter and thus evaluate the health of the thesis.

It also seems that the replacement cycle is beginning to take place. They released preliminary FY26 guidance which suggests that volumes will be fine but adj. EBITDA margins could be north of 16% vs. ~14.6% in FY25. Management has also pointed out that industrywide volumes will be around 31,000 units, which is about 500 north of the long-run average. BLBD's order book is beginning to look like it did pre-covid during the last upcycle which is nice to hear.

Better Position Monitoring

An area I need to improve in is position monitoring after I buy a name. I think this is because I initiated on to many positions over the spring and the winter and then didn't do a good job following up on all of them. I also didn't know what position monitoring looked like, and have since developed a system for staying up to date with my names as each quarter comes out. I find it's enough to read the earnings call and update the model along with understanding what the market's reaction to the stock means for what might be priced in.

Position monitoring is important because it allows you to see if incremental evidence supports or refutes your thesis. I look back at BLBD and feel that I lost connection with the story over the Spring and had to regain my understanding when they printed their 3Q25. I want to do a better job moving forward of not getting disconnected from the companies I own.

Conclusion

Blue Bird was a great position and thesis because it was simple and allowed me to take advantage of what I thought was near term pessimism. I look back at the position ~8 months later and feel it's one of my best research efforts to date. I plan to continue following the story and will keep it on a watch list as a potential candidate to own in the future.