{"id":63462,"date":"2014-11-11T00:45:00","date_gmt":"2014-11-11T05:45:00","guid":{"rendered":"http:\/\/countingpips.com\/?p=63462"},"modified":"2014-11-11T00:45:00","modified_gmt":"2014-11-11T05:45:00","slug":"who-wants-to-own-a-ferrari","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/11\/who-wants-to-own-a-ferrari\/","title":{"rendered":"Who Wants to Own a Ferrari?"},"content":{"rendered":"
November 11, 2014<\/div>
\r\n<\/div><\/div>

By MoneyMorning.com.au<\/u><\/a><\/p>\n

It’s impossible to describe what it’s like to drive a Ferrari.<\/p>\n

The supermodel lines, the smell of fresh leather, the crisp wail of the V12 engine — words can’t do it justice.<\/p>\n

Your heart beats faster the first time you sit behind the wheel. The style is as intoxicating as the performance.<\/p>\n

That feeling goes far beyond the tech specs<\/a> and the driving pleasure. People buy Ferraris to inspire envy in their peers.<\/p>\n

If you could invest in that feeling — the power and glamour — would it make you richer and happier?<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

Soon, you’ll be able to make that investment — but it doesn’t mean you should… <\/p>\n

Car nuts around the world are agog at the prospect of buying shares in Ferrari.<\/p>\n

The sports-car maker’s parent, Fiat Chrysler Automobiles NV [BIT:F]<\/strong>, has mooted plans to spin off the Ferrari brand as a separate, independent company.<\/p>\n

Fiat Chrysler may offer Ferrari stock through an initial public offering (IPO). Although Ferrari shares would likely trade in the US or Europe, very little would stop Aussie investors from buying the stock<\/a>.<\/p>\n

For generations of devout fans — from young boys who’ve plaster their bedrooms with red posters, to ultra-wealthy serial buyers — this could be a dream come true.<\/p>\n

Who wouldn’t like to brag at a dinner party about their Ferrari (stock<\/a>) ownership?<\/p>\n

But if you’re thinking about buying any ‘luxury’ stock — whether it’s Ferrari, Hermes International [EPA:RMS]<\/strong>, Burberry Group plc [LON:BRBY]<\/strong> or LVMH Moet Hennessy Louis Vuitton SA [EPA:MC]<\/strong> — clear your head of those ‘warm and fuzzy’ feelings.<\/p>\n

When it comes to luxury shares, don’t let that swelling pride of prestige ownership coax you into paying more than you should.<\/p>\n

\n

Don’t fall for this lark<\/strong><\/h2>\n<\/div>\n

It’s too early to tell how expensive a Ferrari IPO might be. But we think it’s safe to assume its vendors will pitch the stock at a high valuation.<\/p>\n

They’ll point to the company’s industry-high profit margins of more than 13%. They may quote plaudits from cheerleaders like Brand Finance, a consulting firm that values the Ferrari marque at $4.5 billion. And they’ll definitely offer gallant projections for revenue and profit growth.<\/p>\n

But think about who benefits from an IPO. Either the vendor or the new investors win — and the other loses. And judging by the fact that Fiat Chrysler shares rose by more than 12% after the announcement, the market seems to be tipping that the vendor will win this one.<\/p>\n

Fiat Chrysler knows they can charm a high IPO price out of emotionally driven investors<\/a>. If you fall for that lark, here or in any other ‘glamour’ stock, you’ll only limit your potential gains.<\/p>\n

\n

Value outperforms glamour<\/strong><\/h2>\n<\/div>\n

This simple chart shows how investing in glamour stocks can cost you money in the long run.<\/p>\n

Renowned economists Eugene Fama and Ken French studied this phenomenon recently and came to a simple conclusion.<\/p>\n

Using data from 1951 to 2013, Fama and French tested the annual and compound returns for more than 2,000 US stocks. They were interested in the performance of the cheapest 10% (in terms of price-earnings ratio) and the most expensive 10%.<\/p>\n

As you can see, ‘value’ (the green line) clearly outperforms ‘glamour’ (the red line) over 60 years.<\/p>\n

\"\"<\/a>
\nClick to enlarge<\/em><\/a>
\nSource: Greenbackd<\/em><\/div>\n<\/p>\n

This is not to say stocks<\/a> with high price-earnings ratios can’t go up in good times. But if emotion drives a big chunk of that P\/E, you’re setting yourself up for a fall.<\/p>\n

\n

Dirty performance<\/strong><\/h2>\n<\/div>\n

Would you rather tell people you’ve invested in a Ferrari or a Rent-A-Bomb?<\/p>\n

Nobody wants to be the person at the dinner party with a jalopy. But guess what? The Rent-A-Bomb could be a far superior investment.<\/p>\n

Dirty, low-status businesses are often the best performers, because they don’t attract capital. There’s no glamour. In our work, we find lots of shockingly high-quality junk yards, pawn shops, storage units, waste managers and funeral homes. They’re recession-proof cash cows.<\/p>\n

In short, if you’d be embarrassed to tell people you own it, it’s probably a great business.<\/p>\n

Keep that in mind the next time you consider buying stock in a trendy company.<\/p>\n

Cheers,<\/strong><\/p>\n

Tim Dohrmann+<\/a>,
\nEditor, Money Morning<\/em><\/strong><\/p>\n

PS<\/strong>: Some of the most brilliant cutting-edge tech stocks fly far under most investors’ radars. These firms don’t seek the limelight and they’re not glamourous. But the new F-35 stealth fighter jet wouldn’t exist without the Aussie stock that holds Patent #20XXXXXX219. It’s a revolutionary new technology that makes planes, cars — even spacecraft — lighter and stronger than ever before. The US military, a European car maker and one of the world’s biggest aerospace companies are all involved. And the ASX-listed company behind this proprietary new tech has the potential to make you huge profits<\/a>.<\/p>\n

Join Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n

The post Who Wants to Own a Ferrari?<\/a> appeared first on Stock Market News, Finance and Investments | Money Morning Australia<\/a>.<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au It’s impossible to describe what it’s like to drive a Ferrari. The supermodel lines, the smell of fresh leather, the crisp wail of the V12 engine — words can’t do it justice. Your heart beats faster the first time you sit behind the wheel. The style is as intoxicating as the performance. That […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-63462","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/63462","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=63462"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/63462\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=63462"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=63462"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=63462"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}