On to the Right Bank

The overall market, meanwhile, goes from strength to strength. The clumsy approach right now is to just “buy the market”: the “let’s jump on the bandwagon” type of approach. That tactic is fraught with hazard and risks minimizing returns, rather than the reverse. At Amphora we try to illustrate a better way of making as much money as possible from the current opportunity.

In a normal economic recession, inventories fall because there is no point having money locked up on shelves in goods which no-one wants to buy. This de-stocking process works in exactly the same way in the case of fine wine, and barring an occasional brief window of accumulation most merchants’ shelves have hardly been groaning with bottles over the last five years.

A merchant is a stockholder, and is almost immediately responsive to changes in buying patterns. Making his money “on the turn”, he is only in business if his shelves are full when the buyers come to call, and what tends to happen is that after a long period of consolidation the stockholders build up their inventories again rather tentatively. They’ve been burnt by false dawns often enough.

After a while the “dawn” becomes confirmed, so buying escalates and this drives the market higher and higher, and this is why a market or index move can last for much longer than might otherwise seem reasonable. The stockholder doesn’t actually care that he could have bought more cheaply last week or month. He might not have had a buyer at that time. He has a buyer now though, so into the market he goes, and higher go prices. That is exactly what is happening right now.

But back to the Right Bank. We wrote a few weeks ago about how out of favour Ausone seemed to be. Well not the 2010. At least not now. Remember that the prices quoted are Liv-ex market prices which are defined thus: “The Market Price is an indication of the price you are likely to pay for SIB-compliant stock, off the exchange. The price given is for a 9-litre case, and is based on the cheapest 6 and 12-pack wholesale prices advertised by leading merchants in the EU.”

On 22 June Ausone 2010 was £8,389. It is now £12,630. That’s a cool 50%. The 2000 is up 37% and the 2001 just over 24%. My point in highlighting these is not just to show that there is life in the Ausone stable, but also to illustrate that the action is absolutely not just at the lower-priced end of the market. Petrus 2013 costs £27,000 and it is up 25%, whilst the 1997 is up 37% and the 1999 is up 30% and they both come in well above £20,000 per case.

Just to illustrate that every dog has its day, Cheval Blanc has really struggled to make much headway in recent years. It is a château with a great tradition but has a hard time pleasing the critics in anything other than knockout years, and its investment performance has left much to be desired. There are those who argue that “it has never caught on in China”, which may or may not be true but is pretty binary in terms of analysis.

In recent “on” vintages it has scored very well, with either 99 or 100 points in 2000, 2005, 2009 and 2010, but it is the 90-point 1996 and 2004 which have led the way of late, rising 23% and 12% respectively. Beyond that prices are mildly firmer across the board, but unfortunately nothing to get too excited about.

Elsewhere in St Emilion Angelus is edging out Pavie in the traditional battle royal between the two for investor affection. Angelus takes spots 1-6 and Pavie 7-12 out of the top 12 risers. We wrote at some length about these two châteaux recently and on balance still prefer Pavie, where the 2008 represents great value on a relative basis.

Pomerol offers quite a mixed bag. Most Petrus vintages are quite a bit firmer, beyond those very high risers mentioned above. There are however a lot of non-movers from this region, although from time to time something lights up the landscape. Trotanoy 2004, for example, merits a rather feeble 89 points but has moved from £820 to £1,160 since the vote, a 40% hike. Please note: the 1997, 1999, and 2002 all score 89 points as well, and they are still sitting at around the £900 mark. If this market remains on an upward tack these are all going to move quite sharply when they too catch the wind.

Philip Staveley (pictured) is head of research at Amphora Portfolio Management. After a career in the City running emerging markets businesses for such investment banks as Merrill Lynch and Deutsche Bank he now heads up the fine wine investment research proposition at APM. www.apmwineinvestment.co.uk