Ferrari thinks it’s worth $12 billion…

The Italian luxury carmaker plans to hold its initial public offering (IPO) next Wednesday. An IPO is when a company sells shares to the public for the first time. Companies “go public” to raise money. In this case, Ferrari is hoping to raise around $900 million.

Ferrari’s owners hope investors will value the company at around 11 billion euros ($12.4 billion). Last week, Bloomberg Business explained why Ferrari is seeking a rich valuation:

Fiat Chrysler Chief Executive Officer Sergio Marchionne, who’s also Ferrari’s chairman, has insisted for months that the brand should be valued as a luxury-goods maker, such as clothiers Prada SpA or Hermes International SCA, and not as an auto manufacturer. Those companies trade at over 20 times operating profit, more than twice the average valuation of carmakers.

•  Ferrari hopes its IPO will go better than First Data Corp.’s IPO did yesterday…

Global payment processing company First Data Corp. (FDC) went public on Thursday. It was the biggest IPO so far this year.

The company originally hoped to raise $3.2 billion. It planned to price shares between $18 and $20. But First Data lowered its debut share price to $16 on Wednesday because of weak investor interest. Even with the lower share price, though, the IPO didn’t generate much excitement. The company’s stock closed Thursday down 1.6%, at $15.75.

First Data isn’t the only big company to have problems with its IPO recently…

On Wednesday, supermarket chain Albertsons postponed its IPO because of recent market volatility. The company was hoping to raise $2 billion. It would have been the year’s second-biggest IPO. Digicel Group Ltd., the biggest mobile provider in the Caribbean, also canceled its IPO last week.

This is an ongoing trend. The number of IPOs in the U.S. is down 20% from last year, according to Renaissance Capital. The amount of cash raised is also down by 44%.

Still, Ferrari is hoping for a better outcome. It likely wants to go public right now because, in general, investors are paying good money for shares of public companies. U.S. stocks are 49% more expensive than their historical average, according to a popular long-term valuation metric called CAPE.

•  Speaking of Ferraris, Casey Research founder Doug Casey just went to Canada to buy one…

E.B. Tucker, editor of The Casey Report, went along with him. E.B. explains why they went so far out of their way to buy a car:

As you likely know, natural resources are in a historic bear market. This has caused a flight out of Canada’s currency, the loonie (aka the Canadian dollar).

Canada is bringing in less money exporting natural resources. The loonie is at its lowest level in over a decade. So we thought this would be the perfect time to buy a Ferrari in Canada.

But E.B. says the dealer refused to sell them a Ferrari:

The F12berlinetta cost about $400,000… If we’d been able to buy it with U.S. dollars, it would have cost $320,000 out the door… But Carlo, the dealership owner, wouldn’t allow it.

Doug says Ferrari dealers only want to sell to locals:

There’s such demand for Ferraris—waiting lists dozens of people long—that the dealers only want to sell to people in the area, so they can buy them back and make a market in them. And perform the service on them, which is actually the most profitable part of the business.

As for Ferrari’s upcoming IPO, Doug says the company’s owners are getting out at the right time:

Ferrari is going to have an IPO on its stock soon. A smart move on their part—when the ducks are quacking, you should feed them. I wouldn’t touch it if your broker offers you some…

Regular Casey readers know that Doug and E.B. travel a lot. This weekend, they’re at the Casey Summit at a luxury resort in Tucson, Arizona, along with multi-millionaire entrepreneur James Altucher, famous trend forecaster Gerald Celente, and other world-class investing experts.

Unfortunately, it’s too late for you to jump on a plane and join them. But you can still get full access by pre-ordering the Summit Audio Collection…click here to learn more and lock in the special, discounted price.

•  Switching gears, Brazil is in its worst recession in decades…

The country’s economy is a total disaster…

The national unemployment rate doubled from a record low of 4.3% last December to 8.6% in July. The São Paulo Stock Exchange has dropped 16% over the past twelve months. And the real, Brazil’s currency, has fallen 40% against the U.S. dollar over the past year.

•  Brazil’s crumbling economy is even threatening the 2016 Summer Olympic Games…

Rio de Janeiro won the bid to host the 2016 Summer Olympic Games in 2009, when Brazil’s economy was in much better shape.

Hosting the Olympics usually gives little, if any, long-term economic benefit to the host city. Many host cities actually lose money. Ultimately, the 2016 Summer Games will likely do more harm than good to Brazil’s battered economy.

Right now the 2016 Summer Games are expected to cost $13.2 billion, according to Reuters. Last week, International Business Times reported that Brazilian tax dollars will likely fund 75-85% of the total cost.

Despite all the taxpayer money being spent, the International Olympic Committee has called Rio’s preparations the “worst ever.”

•  The upside is, Brazil’s beaten-down economy could be hiding excellent investing opportunities…

Nick Giambruno, editor of Crisis Speculator, is closely following the situation in Brazil. In the latest issue of Crisis Speculator, Nick said Brazilian stocks are starting to look attractive:

It’s adding up to a lovely train wreck. If it hasn’t actually hurt you, it’s time to think of the real’s woes as a gift…Brazil is right in the sweet spot…but it’s not quite time to jump in.

Nick is watching from the sidelines until something sends investors running for cover:

I’d like to see a messy event that drops Brazil’s troubles onto the front pages of first-world papers. Something that leaves investors singing, “They’ve got an awful lot of muck in Brazil.” Something that sets off the “Sell” alarm for anything Brazilian. Something with the emotional power of the Greek debt drama this summer or the Cypriot bank implosion in 2013. Then the markets will be begging us to pick up quality, consistently dividend-paying Brazilian companies on the ultra-cheap.

Nick will let his readers know as soon as it’s time to bargain hunt in Brazil. You can hear about these opportunities first by subscribing to Crisis Speculator. You’ll also learn about other exciting investing opportunities popping up on Nick’s Value Radar, “a tool for pinpointing the richest crisis markets.” Click here to learn more and start your risk-free trial.

Chart of the Day

Brazilian stocks have tanked this year…

Today’s chart shows the performance of iShares MSCI Brazil Capped ETF (EWZ) over the past year. This ETF tracks 85% of the Brazilian stock market.

EWZ has fallen 47% since last October. Regular readers know crisis breeds opportunity…and Nick Giambruno says Brazilian stocks are starting to look attractive.

According to Thomson Reuters, stocks on the São Paulo Index are trading at a price-to-earnings (PE) ratio of 10.7. These Brazilian stocks are also paying a 4.8% dividend yield. Meanwhile, stocks on the S&P 500 are trading at a PE ratio of 18.9. They’re yielding just 2.5%.

Regards,

Justin Spittler
Delray Beach, Florida
October 16, 2015

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