Formula 1, the pinnacle of motor racing, has evolved into a multi-billion dollar industry, largely thanks to former tycoon Bernie Ecclestone’s strategic TV contracts and high-profile sponsorships.
As an avid fan, you might yearn to convert your passion into a profitable venture. Although direct investment in Formula 1 teams is impossible and comes with inherent risks, you can still invest indirectly by trading shares in associated companies. Here’s how.
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The Direct Route: Investing in Liberty Media Corporation
Liberty Media Corporation, run by US billionaire John Malone, provides one of the most direct investment opportunities in the world of Formula 1. The company bought F1’s parent company, Delta TopCo, in 2017 for $8 billion, and its shares are publicly traded in the US.
Despite challenges presented by the worldwide Covid lockdowns, Liberty Media Corporation, which also owns Sirius XM and the Braves baseball group, has demonstrated resilience. The company reported a 20% increase in its full-year revenues and an impressive 160% surge in operating income. Liberty Media’s shares have witnessed a 17% upturn, trading at a 10-year high of $65.71, making it an attractive prospect for investors.
Investing in firms associated with Formula 1, often termed ‘picks and shovel’ companies, is another viable strategy. One such company is Ricardo, a UK-based engineering firm that supplies transmission services and components to the McLaren team.
Ricardo’s diverse portfolio extends beyond motorsport, providing consultancy and engineering services across rail, commercial vehicles, defense, environmental, and other sectors. With a steady growth in revenues and a promising push towards greener transport, Ricardo presents an enticing investment opportunity, as its shares have risen by 8% to 414p this year.
The Iconic Brand: Investing in Ferrari
Investing in Formula 1 can also be through globally recognized brands like Ferrari. Founded by legendary Enzo Ferrari in 1939, the company is publicly listed on both the Milan and New York stock exchanges.
Ferrari’s recent performance has been robust, with record net sales reported in Q1 2022, due in part to the advance sales of the limited edition Daytona SP3 model. Despite geopolitical uncertainties and looming worldwide recession, Ferrari’s resilient luxury market and halved net debt make it an appealing investment.
Steady Growth and Future Prospects
Formula 1’s commercial landscape is continuously evolving, with new sponsorship deals, increasing TV viewership, and expanding social media engagement. Companies associated with the sport, such as Liberty Media, Ricardo, and Ferrari, are adapting to these changes and leveraging them for growth.
Liberty Media’s recent announcement of a record 23-race calendar, including the inaugural Las Vegas Grand Prix, points to an optimistic future. Similarly, Ricardo’s increasing research into alternative fuel options and electric vehicles aligns with global green initiatives, potentially opening up new revenue streams.
Ferrari, with its unwavering brand appeal and continuous innovation in its car lineup, remains a strong contender in the luxury automobile market, further bolstered by its successful Formula 1 team. The company’s strong net order intake and robust sales growth, especially in the European, Middle Eastern, and African markets, underline its solid market position.
- Learn more about how Formula 1 makes money.
Risks to Consider
As with any investment, it’s essential to consider the risks involved. Economic downturns, regulatory changes, team performances, and global events such as pandemics can all impact the financial performance of these companies.
For instance, US sales for Ferrari dipped by 12.8% due to geopolitical uncertainties, and a worldwide recession could potentially affect future sales. Similarly, Liberty Media witnessed a decrease in fourth-quarter revenues due to fewer races being run and lower promotional sales.
The Bottom Line
Formula 1 is more than just a thrilling spectacle; it’s also a highly commercialized industry that can offer rewarding investment opportunities. However, like the sport itself, investing in Formula 1 requires strategy, precision, and calculated risks. Through careful research and smart investment choices, fans can gain financial skin in the game they love, while potentially reaping substantial returns.
Therefore, whether you’re a die-hard fan or a savvy investor, remember that in Formula 1 investing, as in racing, it’s not just about speed; it’s about strategy, endurance, and making the right moves at the right time.
