Porsche: High-Moat Car Maker at a Discount

1. China's Economic Policy Impact: New tariffs and import policies in China have increased costs for Porsche, affecting its business operations and profitability.

2. Rising Import Costs: The 2024 tariff adjustments in China are causing higher import costs for Porsche, potentially leading to increased retail prices and reduced demand.

3. Investment Opportunity: Porsche's stock price drop presents a contrarian investment opportunity, appealing to investors looking for undervalued stocks with long-term potential.

4. Strong Consumer Demand: Despite economic uncertainties, the persistent high demand for Porsche, especially the 911 model, demonstrates strong brand loyalty and market presence.

5. Prospects for Long-term Growth: Despite current market and economic challenges, Porsche's enduring appeal and brand strength suggest it remains a viable option for long-term investors.

Introduction

Hello! Let's take a closer look at Porsche's stock. Lately, it's dropped down to about 70€ each share. This isn't just a small hiccup, but it reflects bigger issues that are making investors pay close attention. A big part of this drop comes from new rules in China, a very important place for fancy car makers like Porsche. These rules are changing the game, bringing both problems and chances for companies worldwide.

The Situation in China

China is making big changes in its economy that really matter for international businesses. It has changed how it handles taxes and rules for bringing in products from other countries, which shows it's trying to make its own industries stronger while still dealing with other countries. For companies like Porsche, which depend a lot on selling cars and parts in China, these changes are a big deal. The new rules could change how much it costs to bring cars and parts into China and might make Porsche rethink how it does business there.

A Closer Look at China's New Import Taxes

From January 2024, China started changing its taxes on products coming into the country. It lowered taxes on some important materials and tech parts, which helps local industries grow and stay modern. However, it raised taxes on other things like certain chemicals and tech products. These changes aim to balance China's economic growth with its need for strong industries. For Porsche, this might mean higher costs for bringing car parts or even whole cars into China. Since the car industry depends on parts from all over the world, these new taxes could really affect fancy car brands, which often face bigger changes in taxes.

Challenges Porsche Faces in China

It's getting tougher for Porsche in China, especially with the new tax rules starting in January 2024. The new taxes directly make it more expensive to bring in fancy cars and their parts. For Porsche, known for fast and luxurious cars, this could mean their cars become more expensive in China, possibly making fewer people buy them. This is important for Porsche's business and affects their stock price. When costs go up, the stock price often goes down because investors worry about the company making less money.

Why Porsche Stock Might Be a Good Buy Now

Despite these challenges, Porsche's current stock price might be a great chance for smart investors who think differently from most. This style of investing, called contrarian investing, means buying stocks that aren't popular when their price is down because of temporary problems. Porsche has a strong reputation and people still really want its cars, which suggests the company could do well in the long run. This could be a good time to buy Porsche stock at a lower price, betting on its future success.

My Own Experience

Trying to buy a Porsche myself has really shown how much people want these cars. Getting a Porsche 911 has been really hard, with long waits. This high demand, even when there are bigger economic problems, shows that Porsche is still a strong and popular brand. This ongoing interest in their top models, like the 911, not only shows how solid Porsche's reputation is but also supports the idea that investing in Porsche could be smart despite the ups and downs in the economy.

Conclusion

To sum it all up, Porsche's journey through these tough economic changes, especially in China, really shows how strong and appealing the brand continues to be. Despite the challenges from new tax rules and market issues, Porsche's situation could be a great opportunity for investors looking for growth over the long term. If you have any thoughts or questions about Porsche's position in the market or if you're thinking about investing, feel free to comment or reply to this email. Your thoughts and questions are very welcome, and I'm excited to talk more about these interesting market trends with you.

Happy investing!
Josh

P.S. I want to give a special shoutout to the newsletters I currently enjoy reading:

• Capitalist Letters

• Make Money, Make Time

• Quality Stocks

• The Weekend Investor

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.