#35 - 2021 Predictions
With the pitiful excuse that was 2020 firmly in the rear view mirror, 2021 brings with it a renewed focus on where to be deploying automotive capital as we hopefully move towards a conclusion to this rather laborious epidemic.
While I consider myself an overt optimist, my faith in any kind of post viral recovery has all but disappeared; even in the face of unprecedented global fiscal stimulus and continued supportive monetary policy. Unfortunately, too many already marginalised businesses and sectors have been asked to keep afloat for too long now when they were already weathering some substantial pre-existing leaks. Cash is king has never seemed more appropriate.
So we see bankruptcy filings tick up; the distressed and special situations investors who have been stock piling capital for what feels like an eternity step into restructure, consolidate and hopefully revive what is left of the “good stuff”.
Its bleak there is no denying but it also offers the chance for automotive investors to redeploy capital at more interesting valuations within the modern classic arena. So where to focus?
The key here is to analyse what marques and models you believe from a valuation standpoint have been a little too toppy for a little too long……enter Porsche.
Even if you aren’t that into cars, at some stage in your life you will have had your ear bored off by a Porsche aficionado preaching the attributes of the last aircooled 964 or 993 models or how the fabled 997 GT cars are so important because they were the last to sport the incredible Mezger engines. While there is no denying the provenance, valuations of these “go to” models have in my opinion been on the high end for a while now.
And the proof is somewhat in the pudding; especially in the 997 GT3/RS arena. The same cars have sat on the market at the same prices for some time without selling. I think it is therefore fair to reason a small pricing correction is inevitably due.
Where else? Annoyingly I have to profess that a Contemporary Classic favourite, the Renaultsport Clio V6 has probably seen values run up too fast and too quickly in recent times. In this case it is more a function of a couple of toppy auction sales results which have irrationally caused a belief that all the cars, regardless of provenance or condition are worth silly money. Don’t get me wrong, we remain very bullish on prices in the long term I just believe there is a correction lower before things continue to appreciate.
In the new car space, much applaud has been given by the motoring world to the BMW M2 CS and the Toyota GR Yaris….and rightly so. Both these cars are destined to be automotive icons in their own right. However; much like a fine wine, they will require some aging before they can be truly considered as appreciating assets and Contemporary Classics. The M2 CS is too expensive and the Yaris too common however much like the M3/M4 GTS, they will fall out of fashion only to be re-appreciated a couple of years down the road.
Taking a look at the best of Italy; I feel the over production of the 488 Pista combined with the rapid introduction of the F8 Tributo and SF90 Stradale aren’t going to be good for modern Ferrari residual values. I honestly find the current business model a little perplexing to say the least. It’s like they have looked at McLaren and thought “yes, that’s exactly what we need to do”. I guess that’s what happens when you have public shareholders to answer to…..brand dilution.
Anyway, while Pista values are going down the toilet, the last decade of Montezemolo cars still appear to be incredible value for money. For me, the 599 GTB and 430 Scuderia are where our focus very much still remains. The last truly analogue Ferraris before the power race took over and you needed 10,000 processors to get the car around a corner. Devilish looks with an iconic soundtrack and a quintessential Ferrari experience.
It is going to be an interesting year there is no denying and a key reason why we have intentionally kept our inventory on the lighter side…..to make sure we are in a position to act as and when the opportunity arises. So I guess all that’s left to do is sit back and wait to see how it all shakes out!
Happy Motoring,
Greg