1 Top Stock to Buy Instead of Ford in 2026

Ford has rallied in 2025 (total return ~48% as of Dec. 17) with its P/E rising from 6.8 to 11.5 as market attention centers on Ford Pro, which delivered double-digit revenue growth and an 11.4% operating margin in Q3, even as the company wrestles with tariffs, warranty costs and a supplier factory fire and scales back some EV ambitions toward hybrids and smaller EVs. By contrast, Ferrari trades at a premium (P/E ~37) despite being down ~29% from its peak; it has delivered ~12% annualized revenue growth over the past three years, a trailing-12-month operating margin of ~29%, and an outsized 10-year total return (~726% vs Ford's ~65%), leading the author to favor Ferrari as a higher-quality, pricing-power play for 2026.

Analysis

Market structure: Luxury OEMs (RACE) and premium suppliers win as scarcity + brand pricing power compresses elasticity; Ferrari’s trailing‑12‑month operating margin ~29% and P/E ~37 signal durable cash generation versus cyclical OEMs like Ford whose Pro segment (11.4% Q3 op margin) partially offsets weak mass margins. Mass-market EV makers, commodity‑heavy battery suppliers, and low‑margin dealers are losers if OEMs scale back mass EV rollouts; lower incremental EV supply could shave lithium/copper demand growth by mid‑single digits over 12–24 months. Cross‑asset moves: durable luxury cashflows are credit positive (tighten IG spreads by 10–30bp on sector reweight), reduce implied equity vol for RACE; weaker EV demand pressures battery metal futures and AUD/NZD if sustained.

Risk assessment: Tail risks include global wealth taxation or targeted luxury import tariffs, a >10% drop in ultra‑high‑net‑worth consumption, or major supply‑chain disruptions at Ford (supplier fires) that reverse sentiment. Time horizons: days—momentum and positioning; weeks–months—earnings, tariff rulings, order books; quarters–years—EV policy and capex cycles. Hidden deps: Ferrari valuation depends on perpetual scarcity and FX (EUR/USD); Ford’s recovery leans on recurring Pro contracts and disciplined capex. Watch triggers: RACE margin decline >500bps or volumes down >10% would justify rerating.

Trade implications: Establish a core long RACE (2–4% portfolio) via 18–24 month LEAP calls (≈0.55–0.65 delta) or buy-call spread to cap premium; offset with a 1–2% short exposure to F equity or buy F 6–9 month 10–15% OTM puts as hedge. Implement a pair trade: long RACE vs short F sized 2:1 to exploit structural quality gap; rotate cash from mass OEM ETFs into luxury suppliers and aftermarket parts. Stagger entries over 4–8 weeks and trim RACE if it outperforms Ford by >3000bp YTD differential or if RACE P/E expands above 45.

Key Decisions for Investors

• Establish a 2–4% portfolio long in Ferrari (RACE) using 18–24 month LEAP calls (target delta ~0.55–0.65) or a 24‑month 1×2 call spread to limit premium; scale in over 4 weeks and set a stop‑loss to reduce to 1% if operating margin falls >500bps or Y/Y volumes drop >10% on quarterly updates.
• Initiate a pair trade: long RACE (2%) vs short Ford (F) (1%) equity to exploit quality dispersion; alternatively short F via 6–9 month 10–15% OTM puts sized to 1% portfolio as insurance against fleet/order weakness; close if Ford Pro margin stays >10% for two consecutive quarters.
• Reduce cyclical mass‑market auto exposure (e.g., broad auto ETFs or high‑beta OEMs) by 3–5% and redeploy into luxury suppliers/aftermarket parts names over 1–3 months; this rotation hedges battery/commodity beta should EV rollout slow.
• Monitor these catalysts in the next 30–90 days: RACE order backlog/ASP release, Ford Pro contract announcements, and any tariff/wealth‑tax proposals; if RACE P/E >45 or Ferrari volumes fall >8% Y/Y, trim long exposure by 50%.