05 Nov Ford versus Ferrari

If you followed our advice back in May of 2020 to buy Ford (F) you will be sitting on gains of 398% now.

We re-iterated why we liked Ford (F) in December 2020 when the stock had already doubled in price from our initial buy. If you had bought the stock then, you would have profits of 214% now.

But Morgan Stanley don’t agree with us. They think Ferrari (RACE) is a better buy.

They are wrong. Here’s why:

Morgan Stanley upgraded shares of Ferrari (RACE) on the premise that investors are overlooking the Electric Vehicle made by the Italian supercar maker.

It is true the Ferrari Stradale is a beautiful thing to look at.

But it is a $513,000 Frankenstein of a car made by cobbling together bits and pieces from their range and electric drive technologies supplied by Daimler.

Ferrari (RACE) is just taking an existing car and replacing the race-bred engine with someone else’s tech and slapping a touch screen on it.

This is not what the electric vehicle market wants.

Tesla (TSLA) is successful because every aspect of their cars is designed for an electric vehicle. A Tesla driving experience is totally unique because it was never designed to be a traditional car.

Ford (F) is taking a different approach.

Jim Farley, its new chief executive officer, announced in September that the company will spend $11 billion to build new battery manufacturing plants in Glendale, Kentucky and Stanton, Tennessee. Ford is also partnering with SK Innovation to increase production at a Georgia factory now under construction. The combined production by 2025 should supply one million EVs. Ford is going to need those batteries for its growing lineup of sold-out EVs.

The Ford e-Transit, an all-electric version of its best-selling commercial van, will start production later this month. The initial production run is fully subscribed. Farley said in October that global demand for the Mustang Mach-E now exceeds 200,000 units. Sales of the stylish SUV in Norway are topped only by Tesla. An astonishing 77.5% of all new vehicles sold in Norway are EVs.

And reservations for the Ford F-150 Lightning, a full-size electric pickup, have now reached 160,000. The functioning pre-production concept has wowed automotive writers with its blazing 4.5-second 0-60 mph acceleration, towing capacity and practicality. The battery can power plug-in table saws, air compressors and even a house during a power outage. The Lightning also has a huge, lockable frunk where the engine used to be.

The Ferrari Stradale looks nicer than the new Ford EVs. And the Morgan Stanley headline arguing that investors are underestimating Ferrari’s EV portfolio, is clever clickbait. But the Italian supercar maker is not an EV company, and it will not get a premium valuation based on that transition.

It is true that Ferrari (RACE) shares have outperformed Ford (F) over the last 5 years.

But that was before Ford re-imagined itself as an EV maker. The last 12 months have been a very different story

Ford is different. The Detroit, Mich.-based carmaker has a legitimate electrification transition plan, a big idea that drives investor narratives. As production inevitably ramps up the share price will follow, as it did with Tesla.

Ford is in the early stages of transitioning to become an EV company. Shares could easily double again in the next 12 months. Continue to hold your positions and new investors should buy Ford (F) on any weakness