What Is 1 of the Best Auto Stocks to Hold For the Next 10 Years?
Key Points
Management focuses on capping the number of cars it sells to maintain exclusivity, which supports pricing power.
The stock’s current price-to-earnings ratio is well below its trailing five-year average.
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Investing in automotive stocks doesn't restrict market participants from simply choosing between the mass market players or the electric vehicle innovators. There is a high-quality business that doesn't fit these descriptions and it shouldn't be overlooked.
Here is one of the best auto stocks to hold for the next 10 years.
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Scarcity is a winning strategy
Ferrari (NYSE: RACE) is unique in the industry because it doesn't try to sell as many cars as possible. Instead, management is intensely focused on maintaining brand strength, which exudes luxury, status, and scarcity.
This winning strategy results in robust pricing power, with some models, like the F80, completely reserved even though they sell for seven-figure sums. It's nice to see that in the past five years, Ferrari has reported a fantastic average quarterly operating margin of 26.9%, which is the envy of its peers.
Shares are off their peak
I believe investors overreacted after the business revealed its 2030 outlook, as it implied slowing revenue growth. It's likely Ferrari was being conservative with its forecast.
The shares are now trading 34% below their all-time record (as of Jan. 29). However, it's time for investors to get in the driver's seat and add the business to their portfolios. The current price-to-earnings ratio of 34.3 is significantly cheaper than the trailing five-year average.
Ferrari can be a winning investment over the coming decade.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool recommends Ferrari. The Motley Fool has a disclosure policy.
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