How to invest in Formula 1 shares
Always wanted to invest in Formula 1 racing? Here’s how to invest in F1 shares.
Love Formula 1 and always wondered how you could get some financial skin in the game? After all, it’s a multi-billion dollar industry, thanks to controversial former Formula 1 tycoon Bernie Ecclestone’s success in attracting valuable TV viewing contracts and big name sponsorship for the sport.
It’s not possible to invest directly in Formula 1 teams, of course, and it’s worth remembering that racing is a highly risky investment. However, it is possible to invest indirectly in the sport by buying shares in companies associated with Formula 1.
Liberty Media, run by US billionaire John Malone and part owner of radio company Sirius XM in the US, bought F1’s parent company Delta TopCo in 2017 for $8 billion and the company is publically traded in the US.
Audi and Porsche, owned by Volkswagen, are also set to join Formula 1 as engine suppliers in 2026, although a deal between Porsche, which recently floated, and Red Bull fell through in September.
As with many other areas, good options can also be investing in the so-called ‘picks and shovel’ firms related to the industry rather than the main players themselves.
Remember that it’s never a good idea to invest blindly in something just because you’re a fan. Many football aficionados have been disappointed by investing in their own teams’ shares. It’s important to make sure that the companies you are buying into are good investments in their own right.
Always do your own research before committing your money, because in the worse-case scenario you could wind up losing it all. Here are some stock suggestions:
Liberty Media – F1 in turnaround mode
Through a complex collection of companies, Liberty Media Corporation owns Formula 1, Sirius XM - the broadcasting company famous for outspoken host Howard Stern - and the Braves baseball group. Formula 1 has had a tough time over the past few years due to the worldwide Covid lockdowns. However, things are looking up for the company.
In its third-quarter results, Formula 1 revenues rose 7% to $715 million, while profits increased by 2% to $82 million. Sales and administrative expenses increased by nearly a third, however, to $51 million (from $39 million in the same period last year).
Formula 1 unveiled a number of broadcast contract extensions, including those with Sky Sports, for the UK and Ireland, Germany and Italy, ESPN in the US until 2025 and Austria TV channel Servus TV.
It has also announced its 2023 race calendar, with renewals of Monaco and Mexico City races until 2025, as well as the much-anticipated Las Vegas race. The company is targeting revenues of $500 million from this race alone.
“Formula 1 is delivering in 2022 across all areas including financial results, engagement with fans and action on the track. We look forward to a strong finish to the season with drivers and teams battling on the track,” Stefano Domenicali, Formula 1 president and CEO, told investors.
“We were excited to announce our record-setting 24 race calendar for 2023 which includes the much-anticipated Las Vegas Grand Prix. We also announced significant multi-year broadcast renewals to extend our relationships at attractive rates with ESPN in the US and in three key European markets with Sky.”
Liberty Media Corporation shares have had a strong run this year and are up 3.5% to 59.97p. Investors may consider taking some profits, given the shares are trading at a 10-year high.
Ricardo – motorsports and the environment
It isn’t yet possible to invest directly in Formula 1 team McLaren, which is privately held, although there have been rumours of a McLaren IPO. However, UK-quoted Ricardo is an engineering firm, which produces transmission services and components for the McLaren team. The company has a number of ex-Formula 1 engineers working for it and much expertise in motorsport at its specialist centre in Leamington Spa.
Ricardo is not a one-trick pony, however, also providing its consultancy and engineering services across rail, commercial vehicles, government, defence, the environment and many other sectors.
Management says that, due to the implementation of green policies by various governments across the world, it is seeing more and more demand for its climate support services. Plus, Ricardo’s A&I division is increasing its research into alternative fuel options and electric vehicles, so it should benefit from the push towards greener transport.
At the full-year results in September the order intake rose by 23%, while revenues rose 10.1% to £387.3 million (from £351.8 million last year) and pre-tax profits rose 46% to £24.2 million. The engineering firm boosted its environmental division by acquiring Inside Infrastructure, which specialises in water and sustainable resource management in Australia. The company also completed the sale of its software division for $20.5 million, which helped reduce net debt.
Ricardo shares are up 13% in the past 12 months to 516.99p. However, the shares are still some way off their three-year highs of 800p, last seen in April 2020, so could have further mileage in them.
Ferrari – the resilience of luxury brands
Italian-based Ferrari, formed by the legendary Enzo Ferrari in 1939 from the Alfa Romeo racing team, is now worth €40 billion. While investors can’t put their money directly in the Ferrari Formula 1 team, the world-famous car brand is publically listed on the Milan and New York stock exchanges.
In the third-quarter, the luxury car maker shipped 3,188 units, an increase of nearly 16% (15.9%) on the same period in 2021. Meanwhile, net revenues rose by 18.7% to €1.3 billion compared to the third-quarter last year, while net profit increased by 10% to €228 million. Ferrari generated €228 million in free cash flow during the period.
“The very robust financial results we present today are a further proof of the strength of our business…,” said Benedetto Vigna, chief executive officer of Ferrari. “In the third quarter of 2022, revenues, EBITDA and EBIT grew double digit against the same period in 2021, with a sound industrial free cash flow generation.
“And all these lead us to revise upward our 2022 guidance on all metrics. Today, we continue to manage an outstanding order book: with the exception of few models, our entire range is sold out.”
The shares have had a good run this year and are up 6% to €221.80. However, off their three-year high of €248 seen in November 2021, there could be further upside potential.
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