Cannot afford a Ferrari (NYSE:RACE) Supercar? Then the stock is your alternative, it is Hot too.
A Ferrari fan could spend $215,000 on the entry level Portofino, the company’s newest convertible sports car, or buy 1,340 shares of the company, which is trading at 159.50 on the NYSE.
The Big Q: Take the car or 267,000 shares?
The Big A: The Southside to owning Ferrari stock is not being able to drive your investment.
Ferrari’s stock is even hotter than its Supercars. Shares have spiked more than 65% YTD. For investors who bought stock at Ferrari’s IPO in October Y 2015, the return has exceeded 220%. And if you bought it on my call at 40 in July 2016 it is up 400% ish.
So, what will it be Ferrari car or stock?
It depends on which Ferrari you buy. The current line of production cars; the Portofino, Lusso, 812 Superfast, 488 Spider, the everyday drivers will not be worth a lot in the coming years. But the Special, Limited Editions and 1-Off’s that sell in the millions new will but they are not everyday drivers.
I would not buy a new Ferrari driver as an investment, as barring inflation, the selling price will not likely exceed what the cars sold for new.
But, the big money can be made with Ferraris that have a racing heritage. For Example: Bonhams sold a 1962 Ferrari 250GTO in Y 2014 for $38.1-M, which set a new world auction record then. That was broken years later, when RM Sotheby’s sold 1 for $48.4-M. A 3rd 250GTO exchanged hands for $70-M in a private treaty sale.
“The 1960s are seen as the halcyon era of motorsports,” Minoff explained. “Ferrari made only 36 GTOs. The most valuable Ferraris will always be the racing versions from the 1960’s. Ferraris with 2 seats, no windows and no top are also more valuable.”
Like the stock market, classic car investing has its ups and downs. The cars that will hold their value over time are vintage, classic, and Limited Edition Ferraris that were produced in very small quantities. Competition among investors heats up when exceptional cars like a GTO250 find their way to auction.
People will always pay more for what they cannot have. Over the last 20 years only a few 250GTOs have been offered. On the whole they will always be worth a lot of money.
Dietrich Hatlapa, founder of HAGI (Historic Automobile Group International), an investment research company that focuses on the rare classic motorcar sector, said a car’s racing pedigree is 1 of the biggest drivers in value. I like Ferrari’s that are pre-1972 for investment purposes.
The HAGI Top Index, which includes 50 models from 19 brands, is down 5.4% YTD, but overall has an annualized rate of return of 13% in 38 years. HAGI’s Ferrari Index by comparison has fallen nearly 7% in the same time frame but had seen double-digit growth rates until Y 2016. Its annualized rate of return is 14.8% since launching 38 years ago.
Low interest rates have forced smart money to park cash in assets with greater return potential, Mr. Hatlapa said.
Even though the current market for classic car investing may be down from its peak in 2013, there’s another reason ultra-wealthy investors are committing serious amounts of cash for vintage Ferraris.
“It’s not always about the financial return,” Mr. Hatlapa said. “There’s a pride of ownership. Wanting to be seen. Financials are not a reason people buy these cars.”
He agrees that Ferrari’s mass production vehicles will be money losers over the long term, especially ones with high mileage.
“The best way to preserve value is not to drive them,” he explained. “Some people buy 2 of the same car. One for driving, 1 for putting away.”
Stephen Reitman, an analyst with Societe Generale, said there is evidence Ferraris have become more attainable than they were in the past, especially in regards to the newer models.
“There is a misconception about Ferrari that it makes Veblen goods,” referring to the economic theory that demand for a product rises as the price increases and that expensive goods are inherently higher quality.
“There is a certain demand for a Ferrari but it’s not unlimited,” he added.
Ferrari, unlike Porsche, has a problem selling cars in China, the world’s largest automotive market. Just 8% of the 9,251 Ferraris delivered worldwide in Y 2018 went to China. The largest market for Ferrari is Europe, where 45.7% of cars were delivered in Y 2018. The Americas accounted for 32.4% of Ferrari sales Vs 7% for China last year.
The wealthy Chinese do not drive sports cars and prefer to be chauffeured, The anti-corruption push by the current government has also led to unwanted attention on Supercar owners. And if you have ever driven in China, you will understand that a Ferrari there is ‘garage candy.’
Overall Shayne and I expects both Ferrari investors and owners to see good returns.
Ferrari is the Aristocrat of the automotive sector.
The iconic Italian Supercar manufacturer claimed the title according to the latest Brand Finance Global 500 2019 report launched at the World Economic Forum in Davos.
HeffX-LTN overall technical outlook for RACE is Very Bullish, overhead resistance now stands at 160.79, and support at 156.64, all Key indicators are still Very Bullish in here. Ferrari finished at 159.50, -0.24 Wednesday in NY.
Tune in for the Austria GP this weekend.