法拉利是一个高品质、有韧性的奢侈品牌，拥有强大的定价能力和完整的增长假设；然而，其当前估值（约36倍市盈率）相对于近期低点（约30倍）仍被认为昂贵，因此现在作为直接投资不如在Luce公告后立即投资那样有吸引力。

At the beginning of 2026, we told you that you could buy a Ferrari at a 50% discount by owning it through Exer, an Italian holding company. the crown jewel asset underneath, Ferrari, has posted yet another record quarter. And not only did it post another record quarter, but they're guiding for its best year in history.

We covered Ferrari as a standalone stock. And the conclusion on Ferrari was pretty simple. We love the business, but we didn't necessarily love the valuation, at least not at that time. It was a little too rich for our value investing blood.

So, we were able to get Exor at about a 60% discount to its net asset value, which meant that in a sense, we got Ferrari's shares at the same discount proportionately.

And if you accept that premise, then well, this is one way to bypass the valuation concerns of investing in Ferrari entirely and and get that very high quality business at a much more attractive price.

We're going to spend the bulk of today's episode on Ferrari, which was the primary reason that we bought Exorshares in the first place, but we'll look at a few of Exor's other assets as well.

And obviously that's a huge discount which provides a really hefty margin of safety. But if the market value of its assets declines further like we've seen with Ferrari, then of course that's going to push down exert shares further too.

And so Ferrari has had a pretty volatile year with multiple stumbles that each pushed the stock down over 15%, but it's actually up modestly for 2026. It's just that year-over-year the performance looks pretty rough. And that's despite record high numbers on the top and bottom lines for Ferrari, albeit with a decelerating growth rate.

And that has primarily contributed to the market's revision of Ferrari's valuation multiple lower uh in terms of what price it's willing to pay for a dollar of Ferrari's earnings. To be honest, given what has happened with Ferrari so far this year, it doesn't really surprise me that Xer's price hasn't moved in the right direction since, you know, Ferrari is their biggest investment, even though they own substantial stakes in a number of other businesses that are, you know, somewhat disassociated.

And so in Exer's case, it was obvious to us that the business was and still is heavily undervalued. The market value of their Ferrari stake alone is worth more than the market cap of Exer. And that just doesn't make a ton of sense academically.

And and since we liked the assets that Exer held, including Ferrari, but also some of their other assets, we were fine holding the business with this kind of large discount to NAV because we felt like even if it takes some time to close, we're getting high quality assets and we're getting a very attractive price on them.

So if Ferrari is the crown jewel and many investors see Xer specifically as a proxy vehicle for getting exposure to Ferrari at a cheaper price, then why would they trim their Ferrari stake,

And so at the same time too, Ferrari was trading at one of its most expensive P multiples ever. So, in hindsight, the timing actually looks very, very good. You couldn't have timed it much better in terms of Ferrari was probably overvalued in hindsight and they partially cashed in on that. So, the timing was very, very good.

Yeah. So, for as many complaints that we've had about them selling off parts of that Ferrari stake, we have to keep in mind just how successful that investment was. So, you know, it was an 11x over a 10-year period. I mean, that's nothing at all to scoff at. So, I can see why they trimmed the position.

And as of now, it looks like they did an excellent job, you know, timing that sale as it reached its all-time high before going through some of the issues that it's had this year. So getting back to our point here on holding companies, you'd think that the market would actually reward exor maybe to some extent for cashing out at such a large gain, but I guess there's enough Ferrari focused investors in Exer who basically read that sale as kind of a weakness and not a strength. Almost like maybe they don't trust Exer to reinvest it.

Well, >> yeah, I think it's just a little bit of a of a protest at the fact that, you know, there's this very simple narrative of, hey, Exer is a cheap way to own Ferrari. And then Exer is saying, hey, we're more than that. We can make our own capital allocation decisions.

And so they do something that actually ends up creating value for shareholders pretty effectively in terms of the timing of when they trim the Ferrari position, but was very unpopular with the actual shareholder base because so many folks are just investing in the company as this Ferrari proxy that we talked about.

And the story becomes much more complicated when exit reduces its Ferrari position. And so I would say it's a mix of that or it could also be a signal that investors no longer think that Ferrari itself has the same upside especially that it did at its IPO when it spun off from Fiat.

And so if I look at Ferrari's revenue and profits and per share earnings over the past 5 years, I mean these are numbers are still very very good. But I would have low confidence that even if they maintain these incredible growth rates, the stock is going to be an 11x again over the next decade because the reality is Ferrari is just a more mature company than it was. And the stock today reflects Ferrari's quality positioning much more so than it did at at IPO.

If you have investors who own Exor specifically for Ferrari, they're obviously going to be upset when the Ferrari stakes are sold off.

Yeah, I think the market is probably saying something along the lines of, "Hey, congrats. You you made a really great investment in Ferrari, which actually was just a spin-off of Fiat, which is the company that the family behind Exer had founded."

And so at some point they just can't rely solely on Ferrari to be able to drive doubledigit net asset value growth.

And I say that with the caveat that we don't really think of Ferrari as quite being a car manufacturer per se, right? Ferrari is a luxury brand and they're selling at a very different price point than you know a new Jeep is is going for and so that partially explains how I can say in one hand that car manufacturing is not a great business to be in and then say that we like Ferrari

Anyways, yeah, and I'll just comment there on your point about Ferrari not being kind of a car business. I mean, obviously, you know, when you look at it, yes, it is a car business, but when you're looking at specifically luxury um businesses, they operate in a completely different way. They have completely different margins. And that's why, you know, I think Sean, you made this point in the Ferrari episode that it almost has these sass-like margins, which you never basically see from a car manufacturer.

Now, I want to discuss Ferrari here specifically about how the current narrative of that business has progressed this year. So, when uh it was first pitched on this show, there definitely was an electric angle. I mean, I think the Luch maybe the name of the Luch wasn't quite announced yet, but it was expected that they would have an electric fully electric vehicle that was going to be released.

But, you know, fast forward today and now we have the Ferrari Luche. We've seen what it looks like. And um from the sound of it, it um wasn't received well, but just from looking at some of the numbers that I've seen, it's actually been probably selling quite well. But again, the the market wasn't crazy about it.

So, after the Luch press release was dropped, Ferrari shares fell actually about 7%. But needless to say, when it comes to Ferrari, I think the narrative, I mean, it's really just business as usual. You know, Ferrari is still a strong brand. And despite what many people are saying about the Luch, I find it pretty hard to believe anyone is selling the Ferrari just because they may not agree with the direction of Ferrari went with electric cars or even the Luch.

And I think the problem to me is that EVs are fundamentally more about efficiency and practicality, right? The Toyota Prius comes to mind. They're not these like high-end performance vehicles. And partially there's just a structural design issue where because the batteries are so big, you can't get the sleek shape of a usual Ferrari. And you definitely don't get the revving engine, you don't get the same performance results.

And so if you're spending hundreds of thousands of dollars or a million dollars plus on a car, why would you want something that's practical? I mean, the whole point is that it's sort of an irrational thing to do. But the fact that you can do it is what makes it special. And so I I think the point is to get something extreme. And to me, the luch looks very practical. It looks like a decent car. It looks like something I would buy for my family and, you know, your wife would drive around with the kids in. it it's doesn't really look like a Ferrari. And I think that has made it pretty easy to mock.

And honestly, if it were released from any other car brand, it probably would have been better received. And still that said, I I I don't want to put too much weight on a single car release because I do think it's a big milestone symbolically for them to release their first EV, but I also don't think the fate of the company hinges on it.

And one thing I I like to think about is okay there is a narrative in some circles that the Ferrari brand has been tarnished due to the release of the luch. Really the question is do the numbers actually back up that narrative?

Yeah and I couldn't agree more with your narrative and the numbers comment there Sean Aswath Dataran has a good book called narrative and numbers where he mixes the two to help make good investment decisions. And my guess given the sell-off in Ferrari stock price after the luche was announced was that the market was just leaning purely on narrative. And you know I just don't really see why else the stock price would decrease by about 8% in one day. But it really just goes to show you that in markets the narrative definitely matters at least in the short term.

But oddly enough, even though Ferrari stock price has rebounded by 8% since before they made that luche announcement, meaning Ferrari bulls have stepped in and actually started buying some raise shares at what they believe, I guess, to be depressed prices.

That's true. And keep in mind that Ferrari as a stock is pretty much never cheap. Kind of like the the products they sell. The business was trading at 57 times earnings in early 2025, but after some weakness to start 2026 and the luch news, you were able to get Ferrari shares at a comparative bargain bin price of only 30 times earnings, which I say a little bit sarcastically, but not entirely.

And that also doesn't include the additional discount that you might have gotten from buying through Exer. So in theory, you might have been able to get Ferrari for 15 times earnings through Exer if you timed it right.

Yeah. And while 30 times earnings is kind of optically expensive, um the fact is like you just mentioned, Ferrari Ferrari is a business that's just incredibly resilient.

So one of our mastermind community members made a really good point about luxury brands that have these weight lists just like Ferrari. So, if let's say the world, the entire world or maybe just a specific country goes into a recession and your name is called to purchase a new Ferrari because you're next up on that weight list, well, chances are if you want to remain in good standing with Ferrari, you're going to need to figure out a way to come up with that money even if things aren't going so well in the world around you.

And so, you know, even when you look at the pandemic, for instance, revenue did actually decrease. It was the only year since its IPO that revenue didn't increase, but the decrease was very mild compared to most businesses at only about 8%.

So my assumption was that it might have been a little bit harder for Ferrari to actually have people in the same room to sell given the lockdowns which kind of impeded some of their sales. But even during co the stock was very resilient. Its PE you know stayed mostly about 40 times in 2020 other than you know the immediate lockdown announcement.

So needless to say, um, Ferrari is just a very, very strong business, very, very resilient to economic shocks as well. And I think it's going to continue being a great business for many years to come.

And if we ignore the luche, it is really difficult to see why Ferrari has trended down so far in 2026. We have numbers from the first quarter of 2026 to look at. And so in Q1, Ferrari sold 3,436 units. And if we annualize that number, you get a little bit under 14,000 units. And that is pretty decent trajectory in terms of their historical annual sales rates and and growing on that over time.

So I think if we look at the number of vehicles sold, the number really isn't any lower than any other time in Ferrari's history. in 2024 was kind of a peak year for them. But again, based on annualizing that current number, they're definitely set to do fine, which is not the the implication you would get from looking at the stock price.

So, if Ferrari is still selling the same amount of cars, you know what else could be spooking the market? Perhaps it's the mix of cars. We know, Sean, that all Ferraris are expensive, but even when you look at Ferraris, some are much more expensive than others. So perhaps the mix this quarter was weaker than last and maybe the margins dropped. That would be something I could see happening.

But this also doesn't seem right either since EBITDA margins actually increased from about 39% to 40%.

So in reality it just seems that the market has somewhat changed its mood on this business just because of the Luch announcement. And in October the company did actually release its 5-year outlook. And the implied revenue growth that they're targeting over the next couple years is something like 5% a year.

And clearly for a stock priced at 60 times earnings at one point they were expecting a much higher growth rate well into the future. So the speed with which Ferrari has seemingly become a mature business I think was a surprise to the market and that definitely makes the selloff at least partially justified.

Right? If your expectations of future growth in terms of what management is telling you, what they think is likely to happen have been significantly curtailed, then of course the market is not going to pay a massive premium for the business.

And they also, I think, took some of the excitement out of the luch release because they've already revised down their percentage of their model lineup that they expect to be electric vehicles by 2030 from 40% to 20%. So, they cut that expectation in half.

And even if you don't hate the luche, Ferrari has clearly signaled that electric vehicles won't be as big of a bet for them as they once thought after sinking a lot of resources and R&D into that area.

And then just generally a lot of luxury stocks have been beaten down because China is one of the largest luxury markets in the world and there's been a pretty clear slowdown in luxury spending going on over there. And it might be cyclical, but still it's a headwind that's definitely not doing Ferrari any favors in the immediate future.

I mean to me it really feels like the market is discounting the demand for the luch. Perhaps they are really just focusing on what the press releases are saying about the business rather than, you know, maybe zooming out a little bit and seeing Ferrari for what it really is, which is a strong luxury car brand continuing to sell, you know, cars at very expensive prices.

But if you read what former CEO Luca de Montazelmo said, you'd think Luch spelt Ferrari's death sentence. So he said, "If I were to say what I really think, I'd be doing Ferrari a disservice. You know, we risk destroying a legend, and I'm truly sorry about that. I hope they at least remove the prancing horse from that car. "

Now, one of the complaints that I remember that Daniel shared with us about Ferrari after the Luch was announced was that he felt that the brand would actually be hurt by the Luch. He said that he spoke with a few Ferrari owners that he knew and the general feeling was that the Ferrari owners that he spoke to likely were not going to spend any money on buying a Luch.

Now, since Ferrari has historically gotten repeat sales from about 85% of its customers, if the Luché had little demand from its current customers, it just wouldn't end up selling very well.

It's pretty harsh words to hear from a former CEO of Ferrari. And I always had a bit of an issue with this take because I think Ferrari is with the Luch trying to fundamentally expand their customer base and customer loyalty and retention has been an incredible strength of the business.

One of the things that drew us to investing in the company and why we refer to it as being such a high quality business. But there's also a recognition that if you're going to keep growing earnings at double-digit rates, they do need to probably reach new types of customers ultimately.

So, their total number of vehicle sales has been relatively flat for a few years now. And the market is definitely not going to keep a 60 times earnings multiple on that forever. So to me that explains a lot of the rerating too.

Even if for the time being Ferrari has been able to make up for flat volumes with price hikes. The the thinking is that price hikes can't drive the business for forever because it's it's just not sustainable. And reading between the lines a bit to me the luch is a car again that is meant to appeal to a more tech forward cohort. A different type of group than Ferrari's core customer demographic.

Ferrari has always focused on internal combustion engine vehicles and so buying an electric car was probably not going to resonate ever with many of their core customers. But for better or worse, that is sort of the point of why you launch an electric vehicle.

If the luch attracts a new type of customer to Ferrari that has never bought a Ferrari before, while the core customers keep coming back for traditional Ferrari styles, then despite all the market narrative and all the drama, that would be good for the business.

And so, it's important to remember that so many of Ferrari's cars are sold to repeat customers. And we actually have pretty good data on how many annual buyers Ferrari has, and it's somewhere around 14,000 individuals. And that's just an insanely small number to underpin a $70 billion market cap company.

But with the Luch, I think they are moving towards trying to attract more EV focused buyers obviously who want both an electric car with the aura of Ferrari. And so I could see it doing well in Silicon Valley or or maybe in China, right? People there might be very attracted to the luch in these more cuttingedge tech type cities

right? You know, China seems like a market they were clearly targeting with Luche and it appears that Ferrari allocated somewhere around 90 luch units for the Chinese market.

So, I actually read an article um while researching this episode in the car news China and it was published sometime in late June, about a month after the Luch was announced. Now, interestingly, the Luch in China was sold for a small 7% discount to the European price, but you know, we're still talking about a $590,000 car here. So, it's not like the 60% discount we got from buying Ferrari through Exor.

But the point here is that the car is actually sold out according to that article after a month, just a month in China. So, you know, I think that's a pretty good signal that chances are it's probably going to do well in other geographies as well.

Now, Ferrari CEO Benadetto Vignia has said that they have received orders from both current and new customers. But more importantly, he said the order book is actually extending out towards the end of 2027, which you know, to me that signifies that there's a pretty healthy amount of demand for the Lucha.

Yeah, that's the kind of validation that you would want to see to ensure that a Ferrari thesis is still on track even if the stock price hasn't been kind to us. And just to give you a quick overview of what we outlined as our expectations when valuing Ferrari, some of those key performance indicators over the next five years, we're expecting about 1 to 2% volume growth a year. Not super ambitious. Uh 7% total revenue growth. So that includes, you know, about 5% a year on price and then 1 to 2% on volume growth. and then R&D as a result of the really great operating leverage that this business has falling toward 13% of sales and then operating margins correspondingly expanding to 30% in our terminal year in the model.

So, not to bog you down with numbers too much, but for anybody curious, that was sort of the numbers we were using. And if all that were to happen, we expected earnings per share to be able to grow in the low double digits each year for several more years going forward. And again, those are sort of the assumptions that we used when underwriting Ferrari's intrinsic value.

So first is volume growth. We haven't really seen this move all that much. I I did mention that on an annualized basis, volume could reach an all-time high of something around 13,744, which would represent a volume increase of about 2% over 2025.

However, if we look at the quarterly numbers for car shipments, they tend to be more heavily weighted to the front of the year in that Q1 and then they gradually decrease as the year continues. So, you know, given the Q1 2026 numbers is actually lower than both 2025 and 2024, volume may actually slightly contract in fiscal 2026.

It's probably not the most inspiring start to our Ferrari ownership, but also the percentage rates feel more arbitrary when you think that literally an extra 50 vehicle sales could materially move sales volume trends. And so we're not talking about a huge number of vehicles that need to be sold.

And at a very high level, I do think there will be more and more wealthy people that want to own Ferraris over time. And so that gives me pretty good confidence in saying that yes, sales volumes will continue to grow. And any given year though or maybe for the next few years, sure, volumes could definitely be flat or or decline modestly. And I I can't say with any certainty what would happen.

So the second KPI was based around revenue growth and the assumption there are kind of in that 6 to 7% range per year and since we didn't really expect much in terms of volume growth the assumption here was based a lot on the pricing power of Ferrari which Sean kind of alluded to and Ferrari very clearly has pricing power as I think Shawn and Daniel did a really good job of portraying in their episode on that business. So looking at the numbers just from 2017 until now, the average revenue per unit has increased very drastically from about 239,000 to 446,000. And you know this is why Ferrari doesn't necessarily have to increase its volume. That's a 5% kegger just in its ability to increase its price. So you know this is just the beauty of luxury. You know Ferrari decides it wants to keep its volume stable. All they need to do is increase their prices by 5% per year and they'll get that 5% rise in revenue per year without any changes to their input costs. And because you don't have changes to your input costs while you're charging more and more money, you get that beautiful operating leverage effect.

Yeah. So I would say I think management is maybe being a little modest when they say that they're targeting 5% revenue growth per year over the next 5 years. I think they're setting a low bar. But if that is true then obviously we would have you know slightly overstated their revenue compounding but still there is an operating leverage benefit most likely here.

And so that goes into this third and fourth KPI that we talked about in terms of R&D as a percentage of sales and an expansion of operating margins correspondingly. And for the latest quarter, R&D as a percentage of sales has actually tracked our initial assumption of about 13%. So that's a nice green light there to see.

And the thing is, is someone wealthy enough to buy a Ferrari? I mean, what is an extra 5% in price? That that's probably not going to dissuade them at all because of course there's a massive amount of price insensitivity because you're dealing with ultra wealthy customers that are thinking about buying Ferrari.

So, I should also mention that in the show notes, we'll have a link to our Ferrari model in case you want to see all the different ways that we tried to value the business and the different assumptions that we used kind of underpinning what we're talking about here.

And and in terms of the target operating margins, our assumption was that by the end of 2029, they'd have about 30% operating profit. And Ferrari is already about half a percent away from that. Given the pricing power they have and and the fact that management gave guidance of 29 a.5% I I would say that we have a lot of conviction in them hitting that 30% target and and maybe probably even surpassing it making up for the fact that we might be slightly over optimistic on the revenue compounding side.

Yeah, I tend to agree with you. I kind of feel like uh management is kind of sandbagging the revenue number. I mean, the the only way I can see it it it doesn't rise by 5% is if they, you know, meaningfully decide to lower their their volume, which, you know, doesn't really seem like they're going to do that that much. Um, so yeah, it'll be interesting to see. But yeah, I mean, I just going back and looking at the numbers from the original Ferrari thesis, they all seem very very uh achievable, I would I would say. So, I'm I'm I'm very confident in uh what that model is at right now.

So needless to say, we've spent a lot of time here on the Luch, but it's also important to understand that it's actually not the only car that has been introduced to Ferrari's lineup. So in 2026, they've introduced two other cars, the uh Tessterosa Spider and the Amalfi Spider. The Tessterosa Spider is a hybrid with over a,000 horsepower and the ability to accelerate from 0 to 100 in just 2.3 seconds. These models are going for about $600,000 and higher. And then the Amalfi Spider is a two-door convertible and it's definitely not as powerful as a Tessterosa, but you know, when it comes to Ferrari, that's all relative given just how ridiculously powerful and fast these cars are. So, the Amalfi Spider comes in at a price point below $300,000. And interestingly, one thing I remember reading when I was looking at some of the reviews of the Amalfi Spider was that they're kind of seeing it as kind of an entrylevel car for Ferrari. And just kind of given the price point of it, I I can kind of see that because obviously, like I said, the average purchase price for a Ferrari is somewhere around $450,000. So, the fact that they're pricing this at 300K, uh maybe that goes to show that maybe they want to start getting some people that maybe don't have quite as much money to spend, you know, $4 million on a Ferrari, but do have $300,000 to spend on a Ferrari. So, that'll be uh kind of an interesting point to follow over time as usually it should these cars are stay in in the uh manufacturing ecosystem for about 5 years. So, it'll be interesting to see how many units of this they sell.

Well, there you go, folks. For the humble price of $300,000, you can be a Ferrari owner. I think both of the models look pretty incredible to me. But to be fair, I'm not the target customer. Unfortunately, not even the target customer for their entrylevel vehicle, so it doesn't really matter what I think. But I also haven't had too much of a chance to look at the demand for these two models specifically. And I know Ferrari doesn't really release too much information on that kind of thing either. So were you able to come up with how Ferrari's current customers are thinking about these two new releases? Are they being received well from what you've come across?

Unfortunately, not really to the same extent as the Luch. wasn't really able to find any specific geography that, you know, was claiming that these cars were on some sort of long wait list or even sold out. Now, that doesn't mean that isn't the case, but you know, these two models just haven't quite had the same fanfare as a Luch. So, you can see why they might not be as closely investigated compared to the Luch.

Well, just to revisit one of your points about the unit volumes that we mentioned a few minutes ago, I want to do so because I think it's important. 2026 was the first year since 2020 that Ferrari released four new models in a given year. In a lot of years, it's one or two models, maybe three at most. So, they are bringing a lot of models to market. Uh, and that reflects uh definitely more capex spending and R&D spending on producing those those vehicles. And another thing that's important to consider about Ferrari's output is how that relates to customer demand. And so I see 2026 as being kind of a a hangover year where you go from having a few models to where you're offering significantly more models. And of course, the production process is going to have to ramp up to catch up with that. And so, you know, whenever Ferrari has a new model, they generally tend to ramp up production over time.

Here's what Ferrari's CEO said on the latest earnings call >> for ENA. Well, I think that you may remember in the last call Antonio said that we have different model in ramp up phase. So, uh there are different dynamics and different kind of demand from different client in different parts of the world. So there is nothing let me say that was not planned if not the fact that we are ramping up a lot of new models the one that we launched in the last year.

Yeah thanks for calling that out. So since Ferrari doesn't have to manufacture you know millions of vehicles like the majority of other auto manufacturers they're very very intentional about the ramp up of their newer units. So newer models tend to be a little slower on the production side and then they ramp up before hitting kind of a full cadence more towards the end life of that model. So the logic behind this is to focus on what I mentioned a little earlier which is the point on scarcity. For instance with the Ferrari F80, Ferrari is only manufacturing 799 units of that car in total. Now that's not per year but in total. So this means that the car is just incredibly rare and will only be offered to Ferrari's customers in the absolute best standing. And the price tag on the F80 is in the $4 million range. So, you know, I agree with you on that volume comment. Ferrari, I think, knows what it's doing. And even though it may not increase its volumes very much, it can most definitely rely on other areas such as customization services to help boost both its top and bottom lines.

Yeah. And just to to shift gears here and speak a little bit more about some of the capital deployment developments Ferrari has undergone since we first opened our position in the business. We already know that Ferrari is a company that can reinvest in itself at returns on invested capital well above 20% a year and that's a huge strength of the business.

So let's dig into how they generate those high returns on capital in more detail. Yeah. So one area that I really like to focus on for pretty much every business I own is what's happening with a company's working capital. Now you might be thinking what does that have to do with returns on invested capital? So, let me I'll get and I'll get to that. So, for a capital light business, it tends not to be too much of an issue simply because a capitalite business might not have any inventory. So, you don't get these wild fluctuations in cash flow. But, as I was just discussing the $4 million Ferrari F80, the business does tend to carry some inventory. And obviously, a Ferrari is worth a lot of money once it's complete. So if we just look at three items, inventory, receivables, and payables, we actually see that the net working capital has tripled from 2023, which would impact the return on invested capital number by increasing the invested capital number as working capital is kind of a part of that and which would basically ultimately function to decrease the return on invested capital number. You got to spend money to make money though, right? With the the new model releases, they're definitely ramping up the amount of capital that is going to be tied up in inventory. So that's only a problem if they have trouble moving the inventory. But yeah, it's it's something to keep an eye on and and launching a model temporarily raises inventory because Ferrari has to to hold model specific components before assembly, partially completed cars throughout what is a relatively long production and personalization process. Plus, they have demo vehicles and then you need completed cars awaiting final configuration or or transport or or dealer delivery. So, you've got all that. And then also, as Ferrari has raised prices and sold even more premium models, that of course makes the value of its vehicle inventory more expensive comparatively on paper. So, to some extent, the growing inventory value simply reflects the accounting behind them raising prices.

Yeah. Uh, and the other thing I flagged on Ferrari was their shareholder distribution strategy. So, I know that you weren't really a fan of their buyback strategy, Sean, simply because the shares were just never cheap. And the best use of capital for Ferrari, since they do maintain a high capital efficiency number, is to just pump as much capital back into the business as possible. If they don't have the same reinvestment opportunities, I really think dividends probably make more sense than buybacks. And there's a really easy way to kind of observe this. So, as of today, July 20th, Ray shares are trading at a PE of about 36. So if we invert this, we get an earnings yield of about 3%. And this serves as a great proxy for the yield Ferrari would receive from buybacks. So the question then becomes, is there really nowhere else that Ferrari thinks it can earn a better yield than just 3%. So let's say Ferrari asks themselves that question and they say the answer to that when it comes to investing back into Ferrari is no. But it's not as simple as then just assuming you just execute buybacks. You then have to consider, okay, where can your investors earn a return by receiving a dividend? And with the S&P 500 offering returns in the single digits, I think that a dividend just really makes the most amount of sense here. If Ferrari does pay out 40% of their earnings as dividends, so it's a non-trivial amount. It's just that the dividend yield looks very low because the stock price has been relatively expensive, right? The higher the stock price, the lower the dividend yield. And again, that doesn't mean that relative to the business's actual cash flows, they aren't returning a substantial amount of money to shareholders via dividends, because they are. And at the same time, the amount of money they're putting back into the business, measured as capex as a percentage of revenue is pretty average historically. So, it's reassuring to me that they're not dramatically underinvesting in the business to fund the dividend. And of course, if they're bringing to market four new models in a year, you could have probably guessed that capex wasn't, you know, super super low.

So, one of the best parts of Ferrari to this day is really on the marketing side of things. I think you covered this in your Ferrari episode, and I went pretty deep into it when I analyzed the Formula 1 group, but the race team angle is really interesting because it essentially acts as an alternative form of advertising for Ferrari. You know, Ferrari is still a brand that doesn't really need to focus too much on getting new customers. I mentioned earlier that Ferrari gets about 85% of its business from repeat customers. For that reason, they just don't have to go out and spend, you know, billions of dollars to try and attract new customers. The ones they already do have do most of the heavy lifting for them. But as you mentioned when you first discuss Ferrari Sean, the F1 Ferrari team can be seen as kind of their marketing lever. But instead of trying to feature, you know, a specific model or car, they could just feature the team, the technology, or most importantly, maybe the legacy and the narrative of Ferrari.

Yeah, we were talking before the call about how incredibly valuable the brand of Ferrari is and how you look at some of these other brands that are manufacturers of vehicles and then also have incredible IP that goes along with it.

Uh, and again, that's a huge advantage when you have almost this like mythical level of of lore surrounding how people think about your business. And and yet, despite the fact that F1 has been a pretty effective marketing lever for Ferrari generally, they have not been at the top of the sport for nearly 20 years now. And so, their last drivers championship was before the financial crisis back in 2007. and their last constructor's championship was in 2008. So, while they have been good, they really have not been the best in a long time.

And then that kind of works against you, right? If you you're trying to have the reputation of of justifying $600,000 cars, you probably should be associated with being the best of the best.

And so things have turned around a little bit with them currently being second in the team standings behind Mercedes. And not only that, but he also has uh a ton of little cars around and many of them are also Ferrari. So it's just interesting how these brands are probably intentionally trying to get some sort of mind share and even very very young kids so that they'll hopefully be a customer one day.

So, I think, you know, it really goes to show you, getting back to the marketing angle, that Ferrari can very easily rely on its, you know, multi-deade legacy to help imprint the brand's image into people's minds. It it doesn't really matter that they haven't won in a long time because they've been very relevant that entire time. Obviously, they've been selling more and more cars over that entire time.

So, you know, for the strategy now, which I think has worked very well for a long time, it's really just, you know, when it comes to the F1 team, just stay competitive and allow more F1 fans to become fans of Ferrari.

And then once those people either make enough money to make Ferrari ownership feasible, they will already know that Ferrari is one of the top status symbols to buy if you just want to show off your car.

So, we covered some of the most recent events that I think are most relevant to Ferrari right now, but I think we should also have a look at some of the risks that Ferrari is currently facing. So, in your analysis of Ferrari, you listed one potential risk being that the younger generation simply is not driving as much as earlier generations.

And so for Ferrari though, the the buyer base is so small, talking about a few thousand people and it's such a dedicated customer base. Remember we said 85% of purchases are made by recurring customers. I just don't think broader trends in vehicle ownership at the macro level. I just don't think it affects them in the same way.

Or at least if they ever do feel some kind of sting from it, it's going to be much much further down the line from when other more typical vehicle manufacturers are are impacted. And if cost is also supposedly what's driving down vehicle ownership, then that's really not necessarily a problem for Ferrari either, right? and and surely if you can justify buying a million- dollar Ferrari, you're also going to be prepared to to spend a lot of money to maintain your car.

So, I don't think you're going to be too phased by those maintenance bills. >> Yeah, it's funny you actually bring that up because I was recently speaking to a member of our mastermind community and he mentioned that he had a friend who went to the track somewhere in the US, I believe, to race his Ferrari. Now, something happened to his friend's brake pad on the course. And of course, you know, Ferrari had the personnel and the parts on hand to fix the problem immediately, but the cost was something like $8,000. And this is probably 15, 20 times more expensive than getting that done on a normal car.

But the point remains, it's that Ferrari owners have a large amount of disposable income. So, you know, the fact that owning a car is getting more expensive is just probably not a problem I think Ferrari owners spend any time really thinking about.

And if they want to be environmentally conscious, then they can look to the luch or one of Ferrari's hybrid models. >> And that maintenance work and the parts supplying contributes to revenue too, right? Ferrari's business encompasses the full life cycle of Ferrari ownership, not just the original sale.

And so if you think about it, you you can't get your Ferrari serviced by any other type of mechanic, right? It would be a crazy risk to take for the cost of the vehicle. You want to know that a specialist is working on it.

And so accordingly, when Ferrari sells a car to you today, what really you're taking on is maybe a 20 or 30year commitment to that vehicle and being a recurring customer to Ferrari, buying new tires, and whatever else you might need done to it, or if you want to make any customization changes to it over time.

So I think that's an important thing to to think about is uh how long the customer life cycle is and also the fact that Ferrari really has a monopoly on that in the way that no other or very few other vehicle manufacturers do.

Also another risk that we discussed when we first looked at Ferrari was tariffs and I would say that hasn't really had an impact on demand. And going back to that first point you made there, Ferrari owners are probably going to be the least price sensitive buying demographic of any I can think of. So if there is a 10% premium due to some sort of tariff, that just doesn't strike me as a major impediment to demand

and then of course that's only going to be in the North American or specifically the US geography and Ferrari is very much an international company. And and then you also had the CEO recently commenting on tariffs from their latest earnings release. And when asked about it, he said that they had learned a lot about how to deal with them over the last year. And and even since tariffs had been introduced, they've been able to make up margin by focusing more on product mix. So selling more higher priced vehicles as well as additional customization services. And that has helped to offset the the tariff headwind.

Right now, before we get into some of the other developments specifically at Exer, I'd like to know if your thoughts on Ferrari in terms of its evaluation have really changed at all. You know, given what we've discussed today, I think the model looks very intact, but I'd love to get your insights here.

>> I would say not that much has changed in my assumptions about the value of Ferrari. I wouldn't be keen to significantly revise higher my estimate of what Ferrari is worth. Uh, but I definitely don't see any like glaring mistakes where we we should be rerating our assumptions of what Ferrari is worth.

It's a great business and it's uh definitely more attractively valued than it's been in a long long time.

So yeah, all those assumptions that we talked about earlier, those KPIs that we're looking at, they seem to be tracking for the most part pretty well with the thesis. And so if anything, the assumptions around operating margins like I mentioned are are probably a bit too conservative.

I think Ferrari, if you can, well, let's say sell the same number of models and simply just increase price by 10%. That incremental 10% those extra dollars coming in drop completely to the bottom line. And that is another way to think about operating margin.

And so when you have a business with very strong pricing power, which is what defines luxury brands is is truly pricing power, then yeah, there you you certainly uh can can expect them to continue to grow margins over time, which is why I say we probably are conservative on what can be accomplished on that front.

And if margins are expanding, that means every dollar of revenue that comes in, they're converting into more of a profit. Well, then ultimately you can have earnings per share growth growing faster than topline revenue for a period of time.

So that's all I think important context to have when you think about the assumptions for Ferrari going forward, right? And you know if you look at the assumptions that the market is making by just let's say looking at a stock chart, you'd probably think that you're getting some sort of value because you know it looked like it obviously went up and did really really well in 2025 and then it's come down quite a lot in 2026.

But you know, the problem with looking at this business from just this angle is that it was probably super expensive before and it's probably still expensive today, just to a much lesser degree. You know, instead of trading at a PE over 50 times, it's now at 36 times.

I think the optimal buy was probably right after the Luch announcement when it was trading at just, you know, 30 times earnings.

That was probably the spot where I know you and Daniel were getting very very interested in the stock price as well. So, let me pose a question for you, Sean. When Ferrari initially got to that 30 times earnings, were you thinking about adding to either Exor or Ferrari?

But we are assuming of course that Ferrari is going to get a little bit better over time.

you can kind of think of it as you're either getting a discount on Ferrari or you're paying full price for Ferrari and you're getting these stakes in these other businesses like C&H and Phillips for free and any upside that comes from them is all gravy.

Yeah, it's funny you bring up that they could potentially plow it back into Ferrari. That's actually something that came up to me. I mean, you sold it at 58 times. It was available at 30 times. We won't know, of course, until the next quarterly comes out if they did that or not.

And we think that the Ferrari asset alone will continue to grow in intrinsic value somewhere, you know, who knows, maybe high single digits or low double digits. So I know from an outsers's perspective, it might seem like, why are you guys holding this business when it's just done nothing since you bought it since January?

So the Ferrari business still looks good and we think the valuation gap will close to some degree at some point in the future. So as long as Ferrari continues to compound its intrinsic value, the share price will eventually follow and Exor's NAV will continue to grow.

I think I said at the beginning of today's episode that you kind of have to accept the premise that Ferrari is a compelling business to own to to find this as a decently attractive investment opportunity and again doesn't need to do phenomenally.

But if you're someone who really thinks the luche has ushered in a dark age for Ferrari, which may be what Daniel thinks. I know as a German he's he's taken great offense to uh the automobile craftsmanship uh that went into the luche

And so on the flip side, what's so attractive about this to me is the possibility of having two twin engines magnifying your returns with Ferrari's compounding, which has been very, very good. Plus, Exer's discount

And then if you look at Ferrari, this is a company that has compounded its stock price by 21% a year over the last decade, right?

Ferrari is one of the most special brands in the world. It's the epitome of Italian excellence, craftsmanship, and engineering. And it has been an incredible stock to own, too. Even though the stock itself is not priced cheaply, what if I told you there was a way for us to legitimately gain exposure to the company at something like half price?