Today (14 February) is Saint Valentine’s Day. So in the spirit of Foolish fun, I’ve penned a soppy love letter to a beloved holding in my Stocks and Shares ISA. Namely Ferrari (NYSE:RACE).
You make my heart beat faster, Ferrari
“Dear Ferrari shares,
“From the moment we met in 2022 and I welcomed you into my portfolio, I knew this was no ordinary investment.
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“At first though, I hesitated. You traded at a price-to-earnings multiple of 36, and some called such a valuation too racy. But I saw it differently. Extreme quality demands a premium and you, oh Prancing Horse, are the very definition of ultra-luxury.
“You have more than doubled in value since we entered into our relationship — so we have had the last laugh!
“When I glance around at the so-called competition – ahem, Aston Martin – I feel no urge to stray. Those ravishing red supercars from Italy still turn heads everywhere they go. And I see them holding pole position for decades to come.
“Some shares I’ve been with have proven to be a flash in the pan with no staying power. But you are in a class of your own. Year after year, you deliver truly exceptional margins, steady revenue growth, and a brand so powerful that demand never falters — recession or not.
“While others chase mass production – selling to every Tom, Dick, or Harry – Ferrari keeps output tight. This maintains desirability and an insatiable demand, underpinning extreme pricing power and profits. The net margin was a stunning 23% in 2024!
“What was it founding father Enzo once said? Ah yes: “Ferrari will always deliver one less car than the market demands”. Sometimes less truly is more.
What about our future?
“Naturally, even the best thoroughbreds can eventually grow old and lose their edge. Perhaps pricing power and profit margins are pushed to the absolute limit, hurting the brand in the process. Perhaps the premium value is too high and you end up stalling in my portfolio. In that case, it might be time for us to… sob… part ways.
“As things stand though, I can’t imagine us splitting up. The Daytona SP3 hypercar starts at $2.2m before personalisation options, while the F80 costs around $4m. And the first all-electric supercar is due to go on sale in 2026 at a rumoured $500,000.
“Between 2023 and 2026, 15 new vehicle models will have roared out of the iconic factory gates in Maranello. This fresh line-up is expected to help annual earnings grow at low double digits over the next few years.
“Meanwhile, the order book is at record levels, with a significant backlog. They say money can’t buy you happiness, but it can buy you a Ferrari. And have you ever seen a sad-faced owner experiencing the spine-tingling V12 at full throttle? Me neither.
“Indeed, are you even a billionaire these days if you don’t own a collection of Ferraris?!
“Looking back on our time together, I’m very happy with how things turned out. As for the future, I’m sure there will be speedbumps along the way, and I don’t expect another doubling of the share price anytime soon. But I think we will get through any challenges to even more prosperous times down the road.
“All my love,
“Ben“
