People will want to buy this company's product (never mind a hard or soft landing)

Janis Joplin famously sang the lyrics, ‘Oh Lord, won’t you buy me, a Mercedes Benz’ but if she heard Mary Manning’s thesis on Ferrari (NYSE: RACE) at Livewire Live, she might just change her tune... at least when it comes to the stock. 

Managed Fund

Alphinity Global Equity Fund

Global Shares

View

Manning’s thesis, like the brand on which it is based, was compelling.

First, the financials…

Ferrari has some of the best margins in the whole world, according to Manning.

“It has 50% gross margins, 20% net margins, 40% ROE, and it's growing at 25% this year. So to find stocks with that level of profitability and that level of growth is very rare", says Manning. 

Then, the tech…

Manning highlights that Ferrari is a technological leader, using F1 racing as a development ground for technologies that eventually find their way into the road cards.

“Ferrari use that same technology in the cars that we buy. And it's a leader in hybrids, which a lot of people don't know. By 2026, the majority of Ferrari's are going to be hybrids”, says Manning.

Also, the brand…

As well as the solid financials and high-powered tech, Ferrari has an incredibly strong brand.

In 2021, Brand Finance rated Ferrari the world’s strongest luxury and premium brand, based on factors such as marketing investment, customer familiarity, staff satisfaction and corporate reputation.

Brand Finance gave Ferrari a Brand Strength Index (BSI) score of 93.9 out of 100 and a corresponding elite AAA+ brand strength rating.

None of this is lost on Manning, who points out that:

"This is not an auto stock. This is a luxury stock".

And finally… the control

Ferrari is famous for its precision and uncompromising excellence, particularly on the racetrack, where it has the most Formula 1 victories (243 overall, with McLaren the next best at 183) and the most constructors championships (16) – the award given to the winningest manufacturer each season.

The control required over manufacturing, production, team, and driver to achieve that level of success is significant, and Manning points out that Ferrari has that same level of control when it comes to their income statement.

"At Alphinity, we're looking for stocks that are in an earnings upgrade cycle. Sometimes companies don't have very much control over that, so they can miss earnings and then they have a big downgrade.

Ferrari very, very, very closely monitors their supply and the demand is very high. Since they listed in 2016, they've never had a big earnings downgrade cycle. It's a beautiful stock bottom left to top right", says Manning.

If that thesis wasn’t enough, like a V12 fresh off the line at Maranello, Manning hits one final note that really captures the essence of the opportunity…

"[Ferrari] is a stock for all seasons. We've talked a lot about soft landing, hard landing, AI - these big thematics.

"People are going to want to buy Ferraris almost no matter what happens".