Skip EV stocks like Tesla, says fund manager, naming a 'phenomenal' alternative

Published Mon, Mar 4 20246:28 PM EST

Amala Balakrishner @in/amala-balakrishner @_amalabk

Competition is heating up in the electric vehicle industry, especially between investor favorite Tesla and Chinese automakers like the Warren Buffett-backed BYD . However, one fund manager has some serious reservations about the sector. "EVs really took off and captured our mindshare 5, 6, 7 years ago, [but] they're not really successful yet," Freddie Lait, chief investment officer at Latitude Investment Management, told CNBC's Pro Talks . He said that most EV businesses had not succeeded in making money yet, given the "extraordinary" amount of capital invested initially. "I think it's still going to another three to five years until we know who the winners in electric vehicles are," Lait said on Feb. 21. He manages over $750 million across the Latitude Horizon Fund and the Latitude Global Fund . "We don't own any of the [EV] auto manufacturers and I think the arms race to develop EVs is going to be profitless for a lot of these businesses, including Tesla. So, I would avoid it all, I'm afraid," he added. The fund manager instead has his sights on what he calls "bigger integrated covers," such as Italian sports car manufacturer Ferrari , as well as General Motors , Volkswagen and BMW . 'Phenomenal' Ferrari Lait described Ferrari in particular as "a phenomenal business." Its shares have been on the up over the last few weeks after it reported a 17% jump in full-year revenue for 2023 and struck a bullish tone on 2024. Ferrari trades under the ticker RACE on the New York Stock Exchange and Euronext Milan. Over the last 12 months, its U.S. shares are up over 55%, well outperforming the broader S & P 500 . The company — known for its supercars — plans to launch its first all-electric vehicle in 2025. RACE YTD mountain Year-to-date performance of Ferrari shares on the Euronext Milan Lait's confidence in Ferrari is echoed by analysts at UBS who have reiterated their buy rating on the stock with a 12-month price target of $448 — up from $413 previously. "We think RACE stands out as a key defensive play in an increasingly uncertain macro context and slowing demand in the broader luxury sector, thanks to its exposure to HNWIs (high net worth individuals) and the visibility provided by record order books covering all of 2025 and beyond," they wrote in a note last month. Similarly Morgan Stanley's analysts - who are overweight on Ferrari - flagged the company's "positive risk reward skew, with upside to our bull case exceeding downside to our bear case by more than 2:1, as well as the resilient business model." Other aspects of the company they like include the fact that most limited-edition model launches instantly sell out, and the fact that the automaker has a two-year order book. According to Factset data, of 24 analysts covering the stock, 11 give it a buy or overweight rating, while 12 have hold ratings and one has a sell rating. The average price target on Ferrari is 391.96 euros ($425.14), according to FactSet data, giving it potential downside of around 8%. — CNBC's Michael Bloom contributed to this report.