This is a unique bet which uses some of my Formula 1 fandom to maybe some practical use. The old adage in F1 marketing is, "win on sunday, sell on monday." Which is essentially the memorandum that built Ferrari. No F1 to race in would of meant Enzo Ferrari would never of built what he did. Red Bull invested millions into the sport and classifies it as its biggest marketing return for selling its brain juice beverages. It of course helps they are the only company which has two teams in the sport and two serial 4 time champions since there entry into the sport. The point being, I dont see how this could be any different when/if Aston Martin start winnning races.
Now, its a tough order to win a race in formula 1, let alone multiple ones in a season, and let alone a championship, let alone multiple championships. But Aston Martin has all the ingredients, bar one, to make this success happen. Canadian billionaire, Lawrence Stroll effecitvely controls and owns the team alongside other investors like Aramco - so they have deep pockets backing them. They have just built a state of the art factory and wind tunnel, so they have the gear, and they just brought in Adrian Newey, the sports most renonwned aero-engineer who has been in the sport since the 80s. I believe he has won 20% of the races in that time period at teams like Red Bull, Williams, and McClaren. Lawrence brought him in and even gave him equity in the team, so he is pretty much a lifer now. So they have the owners, the gear, and the right people, they just need a driver capable of winning a championship, preferbally multiple times. Right now they have the bosses son, Lance Stroll, and he is sub-par. A few team principles have made comment he is only in the sport due to his father and wouldnt make another teams line-up based on talent. So he is an issue in the saga. The other driver is Fernando Alonso who has won the championship twice about 20 years ago, but he is still one of the better drivers on the grid, but he is also the oldest. Ideally, they need a younger driver in, someone more aggressive and who will take risks without the risk even popping into there head as there ambition to win a championship trumps life itself. Max Verstappen, the current 4 time world champion has been linked with the team given he won his 4 championships with Adrian at Red Bull, but if he were to move Red Bull would need a dire season in 2026, and Aston would need a leading car heading into 2027. There are of course other drivers on the grid who would fill the shoes, but Aston needs to sign one. If they did that then this stock could be very interesting indeed.
Some history on Aston now. Before Lawrence came in, Aston had lost its spark, its edge in the car world. Designs were meh and everything was same same. Lawrence made his billions in the fashion world of all things and wheeled and dealed his way to prosperity. His son being a racing driver I assume has made Lawrence have a huge eye in dominating F1, I guess his dream is to see his son on the podium in his teams own car. But back to the cars, since Lawrence has come in they have brought out a-load of special cars. I.e. limited number to be made, and high margins, we're talking Ferrari margins. And they are very successful in creating buzz for the company, and no doubt with F1 race wins, the demand for them will be even greater again.
The company has raised capital time and time again since Lawrence has come on board, the company has looked like a total dogs breakfast. So this is a risky bet. I dont think Lawrence will let the business fail, its too big too, but be prepared for more dilution potentially and/or a steep cost of capital. One downside to Aston over Ferrari is that Aston Martin Lagondo only owns 16% of the F1 team and is due to sell that stake to raise funds to fortify the balance sheet. Whereas Ferrari own 100% of there team and gets nice synergies with R&D expenses. The good thing though, is that the team and company have a long term marketing deal where the Aston name and logo will be used extensively. So to fans and consumers, it will be Aston Martin in British racing green winning, rather than a group of investors.
Formula 1 itself has grown in popularity exponentially since Liberty bought it around 9 years ago. It had a roll of luck with its netflix series coming on just as the lockdowns started with covid, and boom the popularity just took off. Combine that with a race in Miami and Vegas, and the sports just growing and growing. Big tech is all over the sport with marketing, the big fashion names are in it. Its the ultimate expression of premium content. The point being, there is no shortage of money watching F1 these days.
So what is the upside here? If things took off and the cash flow started pooring like, you could see a potential 10x here one day. Ferrari makes 1.4bn a year and trades for a 117bn market cap, 83x multiple - go figure. I wouldnt expect a multiple like that, or even half that on Aston, maybe a 20x if they can get there act to gether and look to have a durable advantage in both racing and making desirable cars at high margins. Management believes they are on the cusp of turning cash flow positive and positive EBIT numbers, but I guess its wait and see as investors have been burned by this rhetoric before. Really this bet for me is all about securing a championship winning driver. I may have to sit on my hands here for a good year until 2027 season, but I ponder the idea all the time given the potential upside on offer. But lets say they have it in themselves to get 500mm in EBIT, slap a 20x multiple (porsche multiple) on and its a 10bn company, or a 10x from here.