During his recent Q&A session at the SumZero Top Stocks Investor Summit, Mohnish Pabrai discussed why Ferrari was one of his biggest mistakes. Here’s an excerpt from the interview:
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Pabrai: One of the biggest mistakes I’ve made over time. Guy [Spier] owns a stake in Ferrari thanks to Monish. Thank you Monish for giving Guy Ferrari. And Monish doesn’t own Ferrari.
And when I made the investment in Fiat Chrysler in 2012, when the market cap was $5 Billion, and their sales were $140 Billion, Fiat Chrysler was trading at less than 4% of revenue.
It was just… equity was… and 80 percent of Ferrari was inside that 6 billion and plus there was all the Jeeps and RAM and Maserati, everything else in there.
And at that time Pabrai funds owned something like… something north of one percent of Ferrari, when I looked through the Ferrari stake.
And we made a lot of money on the investment and one of the dumbest things I did was Ferrari looked optically expensive to me and I sold.
And we would probably have three times that amount of money if I just kept the position.
And like Charlie says, old too soon and wise too late.
So one of the lessons I’ve learned the hard way is that very few businesses have the characteristics of Ferrari has. The higher the price of the product the greater the demand.
They recently released their SUV which they don’t even want to call an SUV. It’s going to start at $421,000. You’re not going to get one for $421,000. By the time you option it out it’s probably $600,000 or something.
And you can’t get one at $600,000, they’re all sold out. And so if you actually try to buy one from someone who’s got one you were probably gonna spend over a million on that. That’s an incredible business.
You can watch the entire discussion here:
Article by The Acquirer’s Multiple.
