FERRARI (RACE) INVESTMENT THESIS
There are few companies which can transform hardware into an ecosystem of lifestyle. From the 1980’s series Magnum P.I. to the Ferrari 328 posters with Christie Brinkley draped across the hood on every 12 year old boys wall, the Ferrari has
become a benchmark for personal achievement and success.
INVESTMENT THESIS
When we look at an investment, there are three key areas that we consider.
1. Is the company best in class
2. Is the company in a secular
trend
3. Is there a strong macroeconomic environment.
The Investment Thesis is founded on three pillars
1. FERRARI THE MANUFACTURER
Ferrari is a niche car manufacturer producing the highest luxury performance vehicles
on the planet. To support this, the company has a Formula 1 racing team and builds the experience gained on the track into the vehicles
2. GROWTH IN PERSONAL WEALTH
There is $34 Trillion dollars in the US stock market,
in the US there are xx millionaires and even in smaller countries like Canada there are xx forecast to grow to xx by 2025, an 11% increase. In emerging markets the middle class is growing. Globally, only 5 percent of the population earns
90% of the wealth.
There is a secular trend in the growth of wealth of the worlds population.
3. PRICING POWER
Previously Ferrari maintained a self imposed production cap of 7500 vehicles, this has been raised and
in 2018 is expected to be approximately 9500. This is ‘Supply’. In comparison, Ford sells xx Million vehicles. As the personal wealth of the population grows, there is a movement towards lifestyle and luxury. The current order backlog
for a Ferrari, depending on model, is just under 12 months to between 3-4 years. This is ‘Demand’. When there is low ‘Supply’ and high ‘Demand’ this gives a company Pricing Power. Ferrari is able to command prices above $1Million for some
models and an average 31% profit margin.
What does that mean at MONETWISEHQ?
Ferrari is a fun car and a fun stock.
If you are considering an auto manufacturer as part of a diversified portfolio, Ferrari is a
niche company, the best in class sporting a 32% margin with a long order backlog, growing within a secular trend of wealth creation. There are weakness and threats, but these are offset by the strengths and opportunities.
Ferrari
is a brand like no other. They recognize the secular changes and have a plan to adapt, while maintaining the icona which has made them successful. The late CEO Sergio Marchionne was considered a visionary and if there was any doubt to
his successorship, consider that Louis Camilleri is backed by a strong team with the ability to execute on Marchionne’s vision.
What does all that mean at moneywiseHQ?
Ferrari is a fun car and a fun stock.
If you are considering an auto manufacturer as part of a diversified portfolio, Ferrari is a niche company, the best in class sporting a 32% margin with a long order backlog, growing within a secular trend of wealth creation. There are
weakness and threats, but these are offset by the strengths and opportunities.
Ferrari is a brand like no other. They recognize the secular changes and have a plan to adapt, while maintaining the icona which has made them the successful.
The late CEO Sergio Marchionne was considered a visionary and if there was any doubt to his successorship, consider that Louis Camilleri is backed by a strong team with the ability to execute on Marchionne’s vision.