Ferrari (RACE): Manufacturing Art by Greenwood Investors

In anticipation of Ferrari’s (RACE) IPO, we’re posting our research on the company for our investors. Our One Pager is available to all, and feel free to request a report if you’re keen on the subject.

In a Nutshell:

Ferrari N.V. (RACE) has no equal. Yes, Mercedes is currently on the first place podium on Formula 1, but its products depreciate in value and the company is susceptible to recessions. Like the limited edition LaFerrari or Enzo, shares of Ferrari offer a rare chance to invest in a truly unique opportunity. Scarce are the companies that manufacture products that appreciate in value over time, yet all of Ferrari’s limited edition vehicles produced over the last two decades have appreciated in value at a significantly faster rate than the stock market. Because the company has been slow to address the insatiable demand for its V12 products, for which waiting lists are two years long, Ferrari is embarking on a very gradual increase in vehicle production from 7.2k vehicles to 9.0k a year. Such an increase will bring >60% incremental profit margins and will more than double the company’s operating income to over €1 billion. Just like its vehicles, its shares will have a limited availability of 10% at first, and are ripe for a luxuriously rich valuation. With EBIT more than doubling, Ferrari won’t disappoint even the optimists. Buying shares of Ferrari is akin to owning part of Château Lafite Rothschild, or Jeff Koons. Through our investment in FCA, which we will own at a negative cost-basis, we are able to own one of the world’s most powerful brands without paying the typical scarcity premium.  We are happy owners of this modern artist.

Limited Edition Vehicles have All Outperformed the S&P 500

Ferrari

The Business Is Recession-Resistant:

Ferrari

This article has been distributed for informational purposes only.  Neither the information nor any opinions expressed constitute a recommendation to buy or sell the securities or assets mentioned, or to invest in any investment product or strategy related to such securities or assets.  It is not intended to provide personal investment advice, and it does not take into account the specific investment objectives, financial situation or particular needs of any person or entity that may receive this article.  Persons reading this article should seek professional financial advice regarding the appropriateness of investing in any securities or assets discussed in this article.  The author’s opinions are subject to change without notice.  Forecasts, estimates, and certain information contained herein are based upon proprietary research, and the information used in such process was obtained from publicly available sources.  Information contained herein has been obtained from sources believed to be reliable, but such reliability is not guaranteed.  Investment accounts managed by GreenWood Investors LLC and its affiliates may have a position in the securities or assets discussed in this article.  GreenWood Investors LLC may re-evaluate its holdings in such positions and sell or cover certain positions without notice.  No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of GreenWood Investors LLC.

Past performance is no guarantee of future results.