Sven wrote an interesting article a couple of weeks ago on Ferrari (NYSE: RACE), and how investing in it is dangerous as doing so is investing purely in sentiment. If you didn’t have a chance to read it at the time, you’ll find the article here.
I agree wholeheartedly with Sven on Ferrari. The brand is synonymous with exclusivity, and when a brand’s market is meant to remain small—Ferrari produces only about 8,000 vehicles per year—it’s hard to imagine how the company intends to grow sales, and if sales and revenue won’t grow significantly over time, I have to wonder what the real point is in investing in the company.
Not only that, but the instant sentiment for the company changes or the market begins to decline, Ferrari’s stock price will undoubtedly fall significantly and any gains made will be wiped out.
However, I also believe that there are ways to invest in luxury that do make sense. More →