Ferrari stock faces soaring Testarossa prices for investor favor

Fiat Chrysler CEO Sergio Marchionne anticipates that investors will view Ferrari as a luxury-goods maker. Photo credit: BLOOMBERG

Ferrari's upcoming stock listing may struggle for investor attention with competitors in its own ranks.

Buying one of the Italian supercars, like a Testarossa from the 1980s, has served up gains that are hard to beat.

Vintage Ferraris have surged nearly 7-fold in value since 2006, according to the Hagerty Price Guide Index of Ferraris, which pools prices of 13 of the most sought-after models from the 1950s to the 1970s, such as the Ferrari 250.

Even newer cars, like the Testarossa, have nearly doubled over the past 12 months alone, said Rob Johnson, managing director of Kirtlington, U.K.-based Classic & Sports Finance.

The Ferrari display at the Pebble Beach Concours d'Elegance in California in Aug. 2014. Vintage Ferraris have surged nearly 7-fold in value since 2006, according to the Hagerty Price Guide Index of Ferraris. Photo credit: BLOOMBERG

"Prices may not continue to go up like this forever, but they're never going to crash because these are tangible assets," said Johnson.

That performance could be tough for Ferrari's stock to match after Fiat Chrysler Automobiles NV lists a 10 percent stake in an initial public offering in the coming months.

The Italian-American carmaker sees the super-car unit worth more than $11 billion. That's because CEO Sergio Marchionne expects investors to view Ferrari as a luxury-goods maker.

Companies like Prada SpA trade at more than 20 times earnings, twice the valuation of auto manufacturers.

Still, even those companies can't quite keep pace with the recent performance of a classic Ferrari. The Bloomberg European Fashion Index, which includes LVMH Moet Hennessy Louis Vuitton SE and Hermes International SCA, has by comparison slightly more than doubled since 2006, and Prada has fallen 16 percent this year to below its 2011 IPO price.

"Cars are fabulous and a joy to own," said Johnson. "The fact they go up in value is wonderful."

A 1954 Ferrari 375 MM Scaglietti Coupe owned by Jon Shirley is driven onto the winners ramp after being named Best of Show during the 2014 Pebble Beach Concours d'Elegance in Pebble Beach, Calif. Photo credit: BLOOMBERG

Cashing in

Fiat is hoping to reap about $5 billion from spinning off its supercar division to help fund a 48 billion-euro ($53 billion) investment program that focuses on expanding the Jeep, Alfa Romeo and Maserati brands globally.

After the IPO, the company plans to distribute an 80 stake in Ferrari to its own investors. Still, the past performance of classic cars doesn't mean those returns can be repeated, and there are risks that the $100 billion market could overheat.

"Two years ago, the people buying those cars were enthusiasts," said Johnson. "Now the dynamic has changed, and there's no doubt there are now more people in it for the investment."

That shift could cause demand to dry up suddenly if returns flatten out. The market has suffered corrections in the past, such as in the early 1990s when Ferrari prices plunged as much as 70 percent, according to Simon Empson, managing director of car broker Broadspeed Ltd.

That might make the stock a safer, if less alluring, bet than owning a vintage supercar.

"Fiat is cashing in at exactly the right time," said Empson, who's dabbled in the classic Ferrari market in the past. "But that's more by necessity than good judgement."

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