Category Archives: Stocks

I Did No Better Than the Market

The years 2014 and 2015 were quite a time in the stock market. I cranked some numbers recently to review my market performance over the past two years and came to a certain realization about it, upon which I based the title of this post.

Prior to 2014 my portfolio mainly consisted of 401k mutual funds and I didn’t pay much attention. It would have been a good idea to do so as the market has had a great run beginning circa 2009, and I was a little more than fashionably late to the market as an active investor.

Appreciation vs. Total Return

To be clear, there are multiple ways that market numbers are often bandied about. Sometimes it’s the value of the stocks (or more accurately the price of the stocks). Other times it’s the value of stocks plus dividends received, and which are then reinvested. This is known as total return.

Those figures are theoretically possible to emulate if one is running a large portfolio such that transaction costs are so small a proportion of each trade as to be negligible. Certainly the latter case of total return sets a higher bar. It also reflects a more complete picture. Continue reading “I Did No Better Than the Market” »

Betting On A Red Horse

Ferrari 458 Speciale

Courtesy Ferrari N.A.

I’m not one to bet on horses. I never play the lotto (even with the record 10 figure jackpot currently in the headlines), and I have never even made it to a blackjack table in Vegas despite a few attempts. I didn’t even pay much attention to Williams Grand Prix, another stalwart of the Formula One (F1) circuit, when the company went public. But this time, it’s a little different. Ferrari is now a public company following a spin off from Fiat Chrysler (FCAU), and I have some shares of stock in the Prancing Horse.

The Legend

You might say I’m long on the legend of the Prancing Horse, which began with Enzo Ferrari (1898-1988) as a racing driver for Alfa Romeo in the early days of the automobile. Upon the birth of his son Alfredino (“Dino”), he retired from driving to concentrate on running Alfa’s F1 team, and then eventually setting up shop on his own.

In that bygone era of racing cars painted in national racing colors rather than adorned with sponsorship livery, road going Ferraris were sold to fund operations of the racing team. Ferrari has always been a company that sold cars to go racing, which is quite the opposite of most every manufacturer that has been involved with the sport before or since. It is also the one with the most wins and championships in F1, and the only one that has been part of the sport all through the post-WWII era, starting with the 1950 season.

Unsurprisingly in such a competitive business, the company’s fortunes ebbed and flowed over the years. Dino Ferrari, whom Enzo had likely been grooming to eventually takeover, tragically died of muscular dystrophy in 1956 at the age of 24. Then in the 1960s Ferrari almost sold the business to Ford but backed out. “The Deuce” (aka Henry Ford II) was incensed and commissioned the creation of the Ford GT40, which eventually ended Ferrari’s dominance of the famed 24 Hours of Le Mans endurance race, by winning four times straight beginning in 1966.

Fiat, under the leadership of Gianni Agnelli, bought a stake in the company in 1969 and later became the controlling shareholder. The company went on to some of its greatest successes after Enzo’s death in 1988, launching a slew of critically acclaimed and commercially successful models beginning in the 1990s and returning to its winning ways on the F1 circuit with a combined 14 driver and constructor titles between 1999 and 2008.

Green Pastures

Ferrari is a solid, if expensive investment. It is a trophy property after all. In the short term the share price is subject to fall due to the initial hype surrounding its IPO and the high Price/Earnings (P/E) ratio. However, over the long term I can’t think of many more solid investments in the “automotive” sector. Here’s why.
Continue reading “Betting On A Red Horse” »

A Piece of Ferrari

Ferrari California T convertible

Ferrari California T

A few weeks ago Fiat Chrysler Automobiles (FCA), majority owner of Ferrari, announced it would spin-off the fabled Italian marque next year by floating 10% of the shares on a stock exchange and distributing another 80% to its shareholders.

While details explaining exactly how FCA will go about doing so have yet to be announced, reports indicate that one would have to buy them on the market or be an existing shareholder. How I understood it is if you want to get your mitts on a piece of Ferrari you will probably do better to buy Fiat Chrysler shares than wait to buy Ferrari shares next year, even if it means having to buy convertible debt.

Why Is Fiat Chrysler Floating Ferrari?

Basically they are borrowing on Ferrari’s good name because FCA needs to raise some $60 billion to fund product development through 2018. Various estimates have pegged Ferrari’s value at around $7 billion while FCA’s entire market cap (including Ferrari) is only about $18 billion. No wonder FCA wants to spin off the Prancing Horse.

Ferrari is worth more standing on its own than under the Fiat Chrysler umbrella. So separating Ferrari will more accurately reflect the value of the brand, increasing the amount against which FCA can borrow for product development.

So early last week I bought some FCA shares (stock ticker FCAU) not only because I’m a Ferrari fan – which is a terrible reason to buy stock – but also because I think it’s a good long term investment (even if I don’t view FCA in the same light). Here’s why.

Continue reading “A Piece of Ferrari” »

REITs May Be The Single Easiest Way to Invest In Real Estate

Real Estate Investment Trusts (REITs) invest in a variety of real estate and related asset-backed securities.

Office space is one type of commercial property that REITs invest in.

While buying real estate can be a great investment, there are also ways to invest in it without actually directly acquiring property. It’s a little easier than buying property, renting it out and managing tenants.

In this case I’m talking about a vehicle called a Real Estate Investment Trust (REIT). REITs are akin to partnerships, and were created as a result of legislation in the 1960s to provide investors with additional opportunities to invest in real estate, and receive advantageous tax treatment compared with how they would be taxed as shareholders of a corporation.

REITs buy and operate real estate in a variety of sectors, with some specializing in office space, warehouses, shopping centers or apartments. Others, known as mortgage REITs (mREITs) invest primarily in securities backed by pools of mortgages. Some REITs are publicly traded just like conventional stocks.

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Let Your Cash Hit the Road

Successful investing requires vision and strategy for the long road ahead

Develop your investment strategy for the long haul – Photo courtesy Chance Buell

Investments are like passenger seats in which to passively park money while receiving a solid return, more so than a place to actively drive it on a day-to-day basis like a business or occupation. Of course no investment is completely passive, but the idea is that it should only require a small degree of time and attention relative to the return.
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