Ferrari: On Track
04/06/2017 2:50 am EST
Its brand identification is so strong that owning a Ferrari is perhaps the surest way for the very rich to display status.
It’s also an investment, in that a Ferrari is the brand most likely to appreciate in value, and older Ferraris have sold for many tens of millions of dollars.
The company’s brand was earned by its success in the racing world: it’s far and away the world’s No. 1 racing car. And success breeds success in that the best race car drivers prefer Ferraris.
Over the past 40 years, unit growth for the company has averaged between 3 percent and 4 percent, modest enough to maintain a scarcity value.
Profit growth has been a large multiple of unit growth thanks to rising prices, special projects for ultra-rich customers who want a unique vehicle, and steadily rising margins.
Though the stock has a high price-to-earnings ratio, we think the earnings estimates could be light, leaving room for an upside surprise.
And while Ferraris may be driven by the world’s most aggressive drivers, ironically Ferrari is a great defensive stock.
For example, in 2016, unit sales rose in virtually every region of the world including many beleaguered European countries. Ferrari is on our very short list of stocks to be added to Growth Portfolio.