Aston Martin (LSE:AML) shares have had a torrid few years, with the price dropping by over 90% since its 2018 IPO. The British car company’s stock has failed to meet investors’ lofty expectations since it went public.
Yet, that could be about to change, and the luxury car maker may have its Formula 1 team to thank. Here’s why the Formula 1 team’s recent successes led me to buy Aston Martin shares.
The pinnacle of motorsport
Formula 1 is widely regarded as the pinnacle of world motorsport. Over the years, 171 constructors have competed in Formula 1, and 161 no longer exist.
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It’s understandable then that there was scepticism when Lawrence Stroll and investors purchased the Force India team.
In 2021, the team was rebranded to Aston Martin following Stroll’s investment in the British car company. Despite the racing pedigree that came with the new name, the team’s results were poor, placing seventh in 2021 and 2022.
Things looked bleak for the constructor. However, behind-the-scenes moves were being made to build a future world championship contender. Stroll poached top talent from Mercedes, Red Bull, and Ferrari and invested heavily in team facilities.
The 2023 Aston Martin F1 car is the first to benefit from the technical leadership of Dan Fallows, who was coaxed away from Red Bull. Still, as facilities are under construction, the goal for the Silverstone outfit to be a top competitor was supposed to be a few years away.
Then, in 2023, Aston Martin unexpectedly established itself as a top player, jumping the midfield cars completely and establishing itself as arguably the second-fastest car after two races.
The team has already achieved podiums in both races with driver Fernando Alonso. In the previous two years combined, they only celebrated a single podium position.
Why this relates to Aston Martin shares
Now, success in Formula 1 doesn’t equate to financial success. Teams often spend as much, or more, than they bring in.
So why have I bought Aston Martin shares?
I believe that the success of the Formula 1 team can be directly attributed to the stewardship of its chairman, Lawrence Stroll.
As chairman, Stroll has made the right investments, brought in the right people, and, as of this season, achieved the unthinkable of catching up to the top three teams. Established teams and companies like McLaren and Renault/Alpine have failed to do that for over a decade.
It’s my belief that the F1 team can be viewed as a case study for how the car manufacturer may be turned around. As executive chairman, Stoll is overseeing the car company. Like with the racing team, his leadership might be the key differentiator between the company’s success and failure.
That’s not to say my recent investment in Aston Martin shares isn’t without risk. Financially, Aston Martin doesn’t look like a value share. It has reported losses for the last three years, although revenue has more than doubled in that same period.
I’ve invested in Aston Martin because I think if Lawrence Stroll can turn the Formula 1 team into a top competitor, he can do the same with the car brand.
