This Recession Proof Company is About to Make SUVs

Ferrari earnings

What’s the best business to hold in a recession?

Utilities come to mind. Even when times are tough, everyone continues to pay water, gas and electricity. Another could be a low cost provider that consumers will favour when they have to tighten the belt.

Another great business to hold in a recession is Ferrari NV [VIT:RACE].

If you think about it, a Ferrari is not really a car. If you buy Ferrari it’s not because you want to get from point A to point B. You buy a Ferrari because of what it stands for — power.

And because of that little hose on the front of each bonnet, Ferrari can charge a premium for their cars. Even in a recession.

Ferrari is not really fussed about a majority of the population. They only cater to a very small minority of society — the uber wealthy.

Therefore if you can afford a Ferrari when times are great, it’s likely you can afford a Ferrari when times are tough.

This morning, Bloomberg highlighted that Ferrari could be considering a line of SUVs.

Ferrari is beyond just considering an SUV and will take about 30 months to decide on production, which will be limited to preserve exclusivity, Marchionne told reporters on Monday at the New York Stock Exchange. The comments went a step further from when the CEO said during an August earnings call that an SUV would “probably happen”.

“We’re dead serious about this,” Marchionne said of what he referred to as the “FUV” model. “We need to learn how to master this whole new relationship between exclusivity and scarcity of product, then we’re going to balance this desire to grow with a widening of the product portfolio.”’

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What Will This do for Ferrari Earnings?

Of course, Marchionne would like previous Ferrari buyers and those thinking about buying one, also to buy an SUV, or FUV. But whether they will put this alongside their collection of luxury cars, only time will tell.

At time of writing Ferrari has climbed up more than 78% year-to-date and trades at 33-times earnings.

Ferrari earnings

Source: Google Finance

Cheers,

Härje Ronngard,

Junior Analyst, Money Morning

PS: Want to find more companies that will grow at 70% or more? Check out these three small-caps trading on the ASX right now.

Harje Ronngard

Harje Ronngard

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.

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