Yahoo Finance Mohnish Pabrai Crushing It With 2 Best-Performing Automakers, Ferrari and Fiat
- By Holly LaFon
While Tesla pessimism strikes its stock price after an 833% five-year run, Mohnish Pabrai (Trades, Portfolio), head of Pabrai Investment Funds, staked roughly 44% of his long stock portfolio on two of the best-performing car companies trading in the U.S. It also placed him at the top of the Scoreboard of Gurus for roughly the first half of the year.
Warning! GuruFocus has detected 6 Warning Signs with FCAU. Click here to check it out.
The intrinsic value of FCAU
Year to date, the two stocks, Fiat Chrysler Automobiles (FCAU) and Ferrari (RACE), provided the best returns of any car company. Fiat Chrysler advanced 31.5% to and Ferrari surged 62.7%. The increases helped boost Pabrai's performance for his stocks held in the past six months to 51.08%, followed by mutual fund investor Ken Heebner (Trades, Portfolio) and hedge fund manager Chase Coleman (Trades, Portfolio).
Ferrari tends to sell cars to a different demographic than other U.S.-traded companies, including Tesla, another market outperformer. The cheapest model was $188,425 in 2016, with the highest-priced running in the $400,000 range. Ferrari also sold the most valuable classic car in history: a Ferrari 250 GTO made in 1962 for Formula One racer Sir Stirling Moss captured $38,115,000 at auction in 2012, according to Moneysupermarket.com.
"Research has shown that classic cars are the best investment for returns, with as much as a 28% return over 12 months - and 467% over 10 years. Car buyers have, accordingly, been willing to put a lot of money behind some truly iconic cars," Moneysupermarket.com said in a statement.
Ferrari has also moved into the market for the environmentally conscious. In a conference call to investors, Ferrari CEO Sergio Marchionne announced that every vehicle it makes starting in 2019 will have a hybrid powertrain. Ferrari introduced its first "mild" hybrid, LaFerrari, in 2013.
The shift to hybrids will also set Ferrari for further growth, allowing the company to expand its production beyond 8,000 cars per year - the limit allowed by CO2 emissions regulations.
Tesla, the third runner up for best returns in the past 52 weeks, aims for a mass wider audience with its moderately priced, all-electric Model 3 with an introductory price of $35,000. Before those deliveries begin in late 2017, the company increased its car sales by 53% in the third quarter, moving roughly 12,000 Model S and 10,000 Model X, with 22,000 sold in total.
"Provided global economic conditions do not worsen considerably, we are confident that combined deliveries of Model S and Model X in the second half of 2017 will likely exceed deliveries in the first half of 2017," Tesla said in a statement.
Investor confidence has grown shaky ahead of the mass market model rollout, however. Its stock slid almost 13% in the past month, dragging its year-to-date return to 51%.
Though U.S. automaker Ford (NYSE:F) continues its trek down for the year to date and GM (GM) ekes a 4.4% gain, transaction prices for all U.S. automakers rose to an all-time high in December 2016, largely due to a growing demand for higher-priced vehicles like trucks and SUVs, rather than cars.
Excluding the Italian Ferrari's luxury sports cars, "should the sales mix of cars to SUVs reach a stable point in the near future, actual transaction price growth could match or fall just short of inflation," Tim Fleming, Kelly Blue Book analyst, said.
Mr. Pabrai did not immediately respond to request for his funds' total year-to-date returns.
See his portfolio here.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 6 Warning Signs with FCAU. Click here to check it out.
The intrinsic value of FCAU
