This page will be a mix of why I think FWONA/B/K is one of the best underappreciated businesses in the world and also my interest in formula 1 as a sport. I have put this in the blog category as I dont think it will compound at high teens over the long term, but more that 10-14% region which is sub-par for me, but I own a decent amount for the folks account.
Essentially, I think FWONA is one the best businesees in the world. Royalty like profit margins but also retaining operational contol. Although there income statement doesnt reflect the margins of a FNV or WPM, the essence is still the same. Bernie Eccleston operated F1 when he had it from his house and barely even used paper I read. The capital needed to operate this business is non-existent. What makes the income statement different for FWONA vs FNV/WPM is the team payments. FWONA needs to share its broadcasting, race circuit, and advertising revenues with the 10 teams (11 teams in 2026 with Cadilac entering the fold) via the Concord agreement. Something else Liberty has done since buying from private equity and Bernie is initate a Vegas race which Liberty themselves operate. Its a crazy feat what they have achieved here. Bernie tried for years to break the US market but failed, and Liberty here cracked the code. A Miami street race and a race down Vegas strip seems to of done the trick. Blend that with the success of the Netflix show, Drive to Survive, and FWONA growth has been above satisfactory. Liberty needed to fork out around $200mm for Vegas strip land to build a paddock and grandstand in, and then negotiate with local gov around closing Vegas streets itself to conduct a Formula 1 race in. All the streets where racing would be done needed re-tarmacing with racing asphalt, barriers need to go up for safety, lighting as its a night race, and of course Liberty undertakes all operations. They have added capital intensity to the business with this race buts the returns seem to be huge from doing it. Both through the weekend and in bringing new fans to the sport.
I dont anticipate FWONA to be compounding much above 10-14%, and if they hit 14% it will be down to a multiple expansion, which should happen in my opinion given the uniqueness of the business. Right now the business is in tracking stocks which means some funds are exempt from buying due to rules. But that is changing soon with the tracking stocks being dumped and a common stock taking its place. If Ferrari itself can trade at 83x earnings, then FWONA is deserving of a much higher multiple than todays 28x imo. Especially given its the golden goose and Ferrari itself is the golden egg. Ferrari has the R&D to undertake, it has to deal with cyclical buying of its cars, whilst FWONA just churns out predictable cash flows from long term agreements with broadcasters, advertisers and race circuits.
FWONA and Liberty also just closed a 86% position in MotoGP where they hope to unlock as much value again in that sport as they did with Formula 1. It is generating interest in the motorbike teams as people within Formula 1 saw the team values rise from $1 to >$1bn (not a typo). I have seen Lewis Hamilton is keen on a team as is Guenther Steiner. I wouldnt be surprise to see other F1 insiders and investors buy into the sport. So with this, they have two elite racing sports. Its essentially attempting to squeeze more juice out of the lemon, but with these lemons, the juice doesnt seem to be running out with lots of avenues to go down in order to create value. The amount of races you can hold in one season is sort of fixed at a cap due to driver and team fatigue, and I guess not to mention the novely of a race would also fade if they were weekly. F1 now has 24 races in a season, or almost 1 every fortnight, which is quite intense as it is given the sport is global with huge amounts of gear and people needed to be logistcally moved from continent to continent. So the juice squeezing comes from other avenues like video games, documentaries, and making drivers more available to fans. Its a flywheel effect where the more viewership they can bring in, the more advertisers will want to spend and the quality of the advertising partners will also increase. And as that happens, more investors with deeper pockets will come, and with that that will bring more viewers again as people will want to see what the rich and famous do with there spare time and money.
Tourism is a huge part of the equation when a country hosts an F1 race. These races attract the rich and super rich, and they explore the local areas, try the food and explore the culture. And not just that, given they have money they will explore other parts of the country also and even surrounding countries. The lure to host an F1 race is massive, especially street circuits as you automatically hike tourism. The drivers themselves and hardcore fans prefer the purpose built circuits of course, and you need your mix of both clearly in the modern age. But I can see hosting fees rising year after year as more countries compete for one of the 24 race days, or to retain the race day they have. Its a spectacle to have your city/country on prime television with the rich and super rich on it. You can showcase your strengths like the clenliness, the acrchitecture, the food, the people, and anything else which will capture viewers attention. People on screens will look and think maybe that will make a nice spot for my next holiday? Just another part of the F1 flywheel to keep squeezing more juice from the same ambiotic lemon.
Why do I like the sport so much? Well, its a mix of engineering, teamwork, strategy, driver skills, and unpredictable randomness all thrown into a few hours work 24 times a year. In order to win a championship you need ideally the best car on the grid, or a top car with an outstanding driver. Right now there is a generational talent in Max Verstappen racing. He is up there with the greats of the sport like Fangio, Senna and Schumacher. He has the ability to win races in a car where his team mates are struggiling to finish in the top 8. Every teammate he has had he has demolished, especially post Ricciardo. I'd love to see how quick he would be this season in the McClaren, I think he'd humiliate Norris and Piastri.
F1 isnt just about the drivers though, you need the fastest car also. And thats down to the engineers and designers who have big R&D budgets and state of the art equipment to eek out a tenth or a hundreth of a second here and there. A hundreth of a second here and there over the course of a 50-70 lap race sure adds up, and especially in qualifying where grid position helps determine so much where you will finish the race on Sunday.
F1 teams need to be run like a well oiled machine. From syncing race day strategy with new data coming in by the second to the 2 second pitstop the mechanics need to operate in. A mistake in the pitstop where the time takes 4 seconds could cost the driver valuable points and even the win. Everyone needs to be on point. And then with the strategists using all available data from not just there cars but also there competitors cars and team radio in bringing in cars for pitstops. Bring a car in too-late and you risk an opponent undercutting you with fresher rubber and faster initial track times. But bring in too early and you might risk a safety car (10 second pitstop advantage due to slower racing) or red flag incident where pit stops take no time at all as mechaincs can work on cars. Hence the randomness which drives the emotion in the sport. Lewis Hamilton felt robbed in Abu Dhabi in 2021 when unbeknowist to him there would be one lap of racing left with Max on brand new softs and himself on old tyres. The rules werent strictly adhered to that day, but thats also the randomness of the sport which brings in more fans as you never know quite what will come.
The thrill of the sport is another. Driving side by side at 200mph or going flat out around fast paced corners alongside competitors makes for fantastic racing. One mistake and you send your car and your opponents into the wall. Luckily today safety is drastically improved with deaths very rare and injuries much more reduced. Roman Grosjean literally went through a barrier in a flame ball for a car and came out with minor burns. Its incredible, he was lucky to of even survived. The halo also saved Lewis Hamilton as Max Verstappens car went over his helmet in 2021. No halo would of surely meant a compressed head going through his spine.