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The Aston Martin (LSE: AML) share price is a wealth destruction machine. The FTSE 250-listed company takes investors’ money, and sets it on fire. It’s destroyed 60% of my stake in 18 months, and I’m one of the lucky ones.
Aston Martin shares listed on the London Stock Exchange in 2018 at £19 a pop. Today, they go for less than 65p, a stunning 97% less, and investors still don’t want to know. But at some point, the agony has to stop. Doesn’t it?
Investing is cyclical. There are times when beaten-down shares recover at speed, making loyal investors rich. Take Rolls-Royce (LSE: RR) for example. The British engineering giant struggled for years until – bam!
Staggering FTSE 100 comeback
For years, everything went wrong. Its Trent 1000 engines suffered from corrosion and cracking, while costs rose and profit warnings multiplied. A bribery scandal cost it £500m. Then the pandemic struck, grounding airline fleets around the world, and wiping out its income from aircraft engine maintenance contracts, which are based on miles flown.
Rolls-Royce made a loss of almost £4bn in 2020, reversing the previous year’s £583m profit. Net debt careered past £4bn. And then, things changed. At speed. They’re up 80% over one year and 1,077% over five.
Rolls-Royce really took off after new CEO Tufan Erginbilbiç publicly shamed it as a “burning platform”, telling staff they were losing money with every investment. That description fits Aston Martin rather nicely. Could it engineer the same kind of turnaround?
The two operate on a different scale. Aston Martin makes luxury cars and boasts a prestige-enhancing Formula 1 team. Rolls-Royce has its fingers in a much wider range of pies, including civil aerospace, power systems and defence, while pioneering other areas such as small modular reactors, better known as mini-nukes. Erginbilgiç reckons they could make Rolls-Royce the UK’s highest-valued company. That will never happen to Aston Martin.
Troubled FTSE 250 stock
But like Rolls, the James Bond car maker been hammered on a host of fronts, with patchy sales, missed delivery targets, tough competition from rival marques and of course the pandemic. Happily there’s no bribery scandal. But it does have £1.4bn of net debt, against a market-cap of £650m, and is basically being kept afloat by Canadian billionaire owner Lawrence Stroll.
Yet it remains a beloved brand, and recent launches have earned good reviews, if not sales. On 29 October, the group posted a Q3 loss of £112m as wholesale volumes took a hit from US tariffs. Much now rests on the upcoming Vanquish model, followed by its first hybrid.
Ultimately, the return of flying lit a fire under Rolls-Royce. A US or Chinese economic recovery could do the same for Aston Martin, I suppose, but I’m not convinced. I have weak moments when I think of topping up my stake, but they soon pass. Aston Marting might still skyrocket, but it’s too risky for most investors to consider. For dreamers or gamblers only.
