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Lessons In Strategy From Ferrari’s F1 Team


2023-06-02, Daniel Morgan

Fellow Formula One fans may have done a double take at the title though there is no mistake about it. Ferrari’s storied F1 team has unfortunately had a plight of nearly fifteen years without a Drivers or Constructors’ Championship. It was only around this time last year that Ferrari was a serious contender for both.

In 2022, Ferrari had one of the fastest cars and two highly talented drivers who were determined to win. Unfortunately, the team couldn’t convert these assets into results because of strategic errors in several races. But for those mistakes, racing fans like me may have enjoyed yet another F1 season of tight competition for the top of the podium, race after race. Instead, a gap between Ferrari and their rival formed, widened, and in the end they narrowly came away with second place.

I view Ferrari’s recent struggles in F1 as a lesson about the importance of strategy and proper execution of it in business, not just racing. Without a well-thought strategy, winning is hard. Moreover, being unable to execute on a good strategy opens a gap for competitors.

Sources: Formula One World Championship Limited, QV Investors.


One company which has been in the QV Canadian Equity strategy for several years that has recently closed the gap to its competitors and then some is Loblaw Companies. The two profit engines of the company (Shoppers Drug Mart and its discount grocery business) are widely recognized by investors as being powerhouses in Canadian retail. Despite this regard, for several years these businesses largely underperformed their potential. In the grocery market, Loblaws’ position was being ceded to rivals, much alike to Ferrari’s struggles in the Constructors’ standings. Put succinctly, Loblaws was not focused or moving fast enough to compete.

Recognizing its need to become a more competitive operator, Loblaws implemented significant changes over the last two years which have yielded results. Before 2021, product assortment and pricing were not changing fast enough relative to the competition, so a new COO was hired to bring about swifter decision-making processes. Separately, costs were not in control partly because it was investing in too many projects (e.g., delivering its own brand of meal kits at a loss), so Loblaws pursued less of them to save more. In addition, there were over two dozen locations perennially losing money, so it closed many of them or converted the lease into a more profitable store (e.g., shutting a City Market to open a T&T).

The QV Canadian Equity strategy bought more shares of Loblaws in mid-2021 upon the company demonstrating a commitment to resolve the miscalculations it made and to maximize the value of core assets. Ultimately the strategy changed for the better and it continues to execute on it well. Loblaws has gained substantial share in the grocery market and, in the more difficult race, won share in the discount category from its rival Walmart Canada. These are only a few details about the resurgent Loblaws, though we can see a marked improvement in its financial results.

Sources: S&P Capital IQ, QV Investors.

Sources: S&P Capital IQ, QV Investors.


There are businesses in QV’s Canadian Large Cap strategies which, like the best F1 teams, display an ability to adapt their strategy when conditions change to remain in the lead. One of these companies is Toromont Industries. It has long been a favourite business of QV’s because of (among numerous factors) its high-quality management team and durable franchise as the sole supplier of Caterpillar equipment in eastern Canada.

Selling or renting heavy equipment is undoubtedly a competitive space but Toromont has steered through it profitably for decades. Recently, 2022 was shaping up to be a slower year, especially in context of the quick pace of growth set in the year prior. Equipment availability from manufacturers remained below normal in 2022, creating unique obstacles for Toromont and competitors alike.

To succeed, Toromont used its close relationship with clients to order new equipment months sooner than the norm to secure their business. Concurrently, it used its special abilities to source and rebuild machines to satisfy the robust demand in the used market. We were also pleased to see the large investments in its rental fleet made over the last two years paying off, enhancing the return on capital of the business.

Sources: S&P Capital IQ, QV Investors.

Despite the market presenting unique challenges in 2022, Toromont demonstrably committed to winning customers and maximized on the opportunity. The result was another year of above-average revenue growth while cost management enabled even higher profit growth.

Sources: S&P Capital IQ, QV Investors.


In my opinion, Ferrari has exhibited that having great assets is only a part of the race to the top. In competitive racing and business, staying ahead of competitors requires those assets to be directed by an effective strategy and for it to be executed well. One of the most successful team principals in F1 history, Ross Brawn, once professed his belief, “The enemy of stability can be complacency.” This appeals to the idea that the best teams adapt their approach as conditions change.

We will never be able to influence the strategic direction of Ferrari’s F1 team, though we can glean insights about strategy from their recent mistakes. We can also learn Ross Brawn’s reflections on his long career in F1, including many championship-winning years at Ferrari. We are fortunate at QV to have a uniquely collegial culture among our investing team that lends itself to avoiding complacency and keeping apace with the market. Guided by our value investing strategy, our team pursues opportunities in businesses that fit our seven tests of quality minimizing the risk of loss to our client’s capital.

All views and projections are the expressed opinion of QV Investors Inc. and are subject to change without notice. This Update is provided for informational purposes only. QV Investors takes no legal responsibility from any losses resulting from investment decisions based on the content of this Update.


Daniel Morgan | Research Associate

Daniel analyzes investment opportunities and monitors existing holdings for the Canadian large cap strategy.