Author Topic: RACE - Ferrari  (Read 51417 times)

Phaceliacapital

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RACE - Ferrari
« on: October 10, 2015, 08:05:59 AM »
Due to the upcoming spin I thought it would be good to open a Ferrari topic, starting it off with some research from Steven Wood (whose predictions on mother company Fiat have been quite right so far..):

http://www.gwinvestors.com/2015/10/10/ferrari-race-manufacturing-art/

The harder you work, the luckier you get.


LC

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Re: RACE - Ferrari
« Reply #1 on: October 10, 2015, 08:11:16 AM »
A line in GW's one-pager got me thinking, what other companies produce appreciating assets?
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kfh227

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Re: RACE - Ferrari
« Reply #2 on: October 10, 2015, 08:17:55 AM »
What do they plan on doing with the IPO?

If they started mass producing something to compete against the likes of BMW 7 series, I'd be interested.

muscleman

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Re: RACE - Ferrari
« Reply #3 on: October 10, 2015, 08:35:19 AM »
What do they plan on doing with the IPO?

If they started mass producing something to compete against the likes of BMW 7 series, I'd be interested.

The plan is more likely to be making engines for Alfa and Maserati, so it will piggy back on those two. In other words, the success on RACE will still depend on Sergio's plan on FCAU. It is still unclear to me how much profit run way will this engine business have.

merkhet

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Re: RACE - Ferrari
« Reply #4 on: October 10, 2015, 08:36:09 AM »
What do they plan on doing with the IPO?

If they started mass producing something to compete against the likes of BMW 7 series, I'd be interested.

The IPO helps FCAU de-lever while at the same time separating a company that should have a higher multiple (EBITDA, EBIT, EPS, whatever) from a company that suffers from a much lower multiple.

Additionally, I don't think that mass producing something to compete against the BMW 7 series would be a good strategic play for them. The minute they do that, they start losing both brand equity and customers. The Ferrari customer and the BMW customer do not really overlap.

JayGatsby

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Re: RACE - Ferrari
« Reply #5 on: October 10, 2015, 10:28:20 AM »
What do they plan on doing with the IPO?

If they started mass producing something to compete against the likes of BMW 7 series, I'd be interested.

The IPO helps FCAU de-lever while at the same time separating a company that should have a higher multiple (EBITDA, EBIT, EPS, whatever) from a company that suffers from a much lower multiple.

Additionally, I don't think that mass producing something to compete against the BMW 7 series would be a good strategic play for them. The minute they do that, they start losing both brand equity and customers. The Ferrari customer and the BMW customer do not really overlap.
Why do luxury brands carry higher multiples? I guess you're saying the typical Ferrari buyer has a lot of money in the bank so they aren't as susceptible to the swings of the economy? I'm sure some buyers are like this, but when I lived in LA I heard a lot of the Ferraris, Maseratis, etc are actually leased (don't know if that's actually true though). Seems like Ferrari has benefited from the same race to hold tangible assets that have benefitted Sotheby's, etc. In Argentina someone was telling me how they buy cars and boats as investments because they go up in value relative to the currency. It wasn't really as much a statement about the quality of the investment as much as it was about the crappiness of their currency.

Comparing a share of stock to a Jeff Koons piece sounds like a recipe for overpaying... you own a share of a company, nothing less, nothing more. I think it was Jim Rogers who used the cocktail party test.. if it's a good conversation piece, don't buy it.

merkhet

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Re: RACE - Ferrari
« Reply #6 on: October 10, 2015, 10:56:46 AM »
Take a look at their volume drop during the recession and their EBIT generation. They held up rather well.

I have a chart somewhere, but I'm not at the computer at the moment.

writser

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Re: RACE - Ferrari
« Reply #7 on: October 10, 2015, 11:20:38 AM »
Interesting idea might be to see whether this is shortable to set up a stub trade. Probably not going to happen at a decent rate though.
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compounding

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Re: RACE - Ferrari
« Reply #8 on: October 10, 2015, 12:19:50 PM »
Ferrari doesn't make engines for Alfa Romeo, only Maserati.

Luxury brands have higher multiples because they have pricing power, so their margins are better, and in Ferrari's case they have held up in a down cycle.

You really shouldn't compare Ferrari to the traditional OEMs.

And really, BMW? They make like 2 million more cars a year than Ferrari. To think that people talk about adding 2k more units will dilute the brand :)
« Last Edit: October 10, 2015, 04:46:49 PM by compounding »
@JohanHjortsson

Picasso

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Re: RACE - Ferrari
« Reply #9 on: October 10, 2015, 01:34:00 PM »
There's a fine line between selling a few thousand more cars and diluting the brand. A few thousand more cars can be concentrated in certain urban areas and basically change the entire brand appeal.

There's a Maserati dealership nearby with a lot full of cars. I see so many new Maserati's lately that it's changed the appeal of getting one.

Ferrari is like Manchester United or a similar niche/scarce asset. You have pricing power but you have to be very careful at exploiting the brand.