Thinking of the Impact Fed Rate Hikes Will Have on Your Portfolio? It's Time to Consider Buying This Perennial Winner That Turned $10,000 Into $86,000 in 10 Years.
Key Points
Changing macroeonomic variables have minimal impact on the success of a company like Ferrari.
Over the long term, steadily rising sales and profits have contributed to impressive shareholder returns.
As this auto stock trades 20% below its record high, opportunistic investors should consider adding it.
It's hard to believe that the Federal Reserve could be under a brighter spotlight. However, since Kevin Warsh became chair, it seems the central bank has been under more scrutiny from the investment community. Everyone wants to know which direction interest rates are heading.
Are you thinking about the impact the Federal Reserve's decisions will have on your portfolio in 2026 and beyond? This is a prominent topic on many investors' minds right now. You're not alone.
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There are certain businesses that are better positioned to keep thriving regardless of monetary policy. With this in mind, it may be time to consider buying this leading automotive stock, which has been a perennial winner historically. Shares have climbed 758% in the past decade (as of Sept. 16), turning $10,000 into $86,000 today.
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Driving in the fast lane
Following its meeting on Sept. 16, the Federal Reserve announced it would increase the federal funds rate. It now sits within a range of 3.75% to 4%, up 25 basis points from the prior level. This was hardly a surprise to the market. The move was made to combat inflationary pressures.
The CME Group's FedWatch tool now puts the odds that the fed funds rate will stay put or be higher after the December meeting at 88%. Investors believe a tighter monetary policy is on the horizon.
In a higher-for-longer rate environment, or if rates rise over the rest of this year, investors should take a closer look at Ferrari (NYSE: RACE). This is a fantastic company with favorable traits. In fact, the business does well in most economic climates.
The brand is paramount to Ferrari's success. Its supercars are produced and sold in limited quantities, always leaving the market wanting more. In addition to the company's rich racing heritage, the status and exclusivity support pricing power. Businesses that can raise prices without impacting customer demand don't need to worry about interest rates.
Ferrari's profits are the envy of the automotive sector. Selling extremely expensive cars, with some fetching seven-figure price tags, coupled with greater buyer interest in personalizations, aids in bottom-line performance. In the past five years, the business has posted an average quarterly operating margin of 27.5%.
This company isn't registering rapid growth. However, its gains are healthy and durable. The consensus view among sell-side analysts is that revenue will grow at a compound annual rate of 7.3% between 2025 and 2028 as the business slowly boosts production volume.
Growth can come from all geographic segments. And there is a lot of wealth out there. There are several million people in the world with a net worth exceeding $5 million. This is Ferrari's target demographic.
Furthermore, consumers like this aren't concerned about what the Federal Reserve or Kevin Warsh are doing. This results in steady demand for Ferrari.
The opportunity is now
Ferrari shares hit their peak in July 2025. Since then, they have fallen 20%. This presents an attractive opportunity for investors. This is an elite company that, as mentioned, has a brand-driven moat, is extremely profitable, and has durable growth potential.
Investors might initially get hung up on the stock's valuation. It trades at a price-to-earnings (P/E) ratio of 38.3. For virtually every other business, this kind of multiple would be considered extremely expensive. After all, Ferrari shares are at a 65% premium to the S&P 500 index.
But this is a special company. And the stock deserves a higher valuation. Over the past five years, shares traded at an average P/E ratio of 44.9. So, today's setup is compelling. A valid argument can be made that Ferrari's P/E multiple could be higher in five years, which introduces added upside for investors.
Shareholders don't have to spend one second thinking about interest rates or any other macro-related topics. Ferrari will continue to operate from a position of strength no matter what the Federal Reserve decides to do.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group and Ferrari. The Motley Fool has a disclosure policy.