What are you waiting for?

The fine wine market shows no signs of letting up, and although the end of last week saw a slight fall in index terms, as this week has begun we have seen nothing but rising bids, with offers “leaving the building” a bit sharpish. It felt like a firmer market to start the week, and sure enough the Liv-ex 50 rebounded 0.33% last evening.

When the fine wine investment market is in full flow like this it is increasingly hard to find bargains. At the Bordeaux end of society most wines from 1996 to the recent vintages have been powering ahead in double digit percentages.

At Amphora Portfolio Management we constantly crawl along the bottom, to coin a phrase, to see what has been left behind, and if the investment case stacks up, we present it for scrutiny. Not only does the post referendum phase represent a decent reference point, but so does the last 6 months’ performance. Even then we have to investigate further.

Take Angelus 2003. A fabulous 98 pointer which is flat on a six month view, up only 1% over 12 months, and is actually down 3% since the vote. A bargain? Scroll back a bit farther and you will find that it was upgraded by Robert Parker from 93 to 99 points in August 2014, a result it greeted with a hike of 35%, and that, you will recall, in a very flat market. A year later he reduced the rating to 98 and it has been consolidating ever since. Throw in the fact that the 99+ 2009 and 2010 trade at premia of only about 15% and 10% respectively and you can see that Angelus 2003 isn’t quite the bargain after all.

The following, however, might well be:

Cheval Blanc 2005. We are drawn to the 2005 even though it is actually up 13% since the referendum, courtesy of the 2010 which is only up 2%, indeed only 4% over six months. Both are perfect 100s, the 2005 having been elevated from 96 in the retrospective tastings in mid 2015. Parker was clearly ambivalent about this wine in its early years, having accorded it 95-98 in April 2006, 96-100 in April 2007, and 96 in April 2008. The point is from here it matches the 100 point 2010, yet trades at a 22% discount. We would buy the 2005.

La Mission Haut-Brion 2005 tells a similar story. This has always been favoured by Parker and its upgrade from 98+ to 100 last summer was rumoured in the market probably longer than any of the other “retrospective” upgrades. It started 2015 at £3,000, had reached £3,600 by the early summer, before leaping ahead to £4,400 when the news finally came though.*

It is almost as if this was all too much for Mission HB 2005, because it was back under £4,000 by the end of the year, and has been treading water since. What is interesting now, however, is the discount of 10% to the 2009, and 20% to the 2000. I hear people say: “Aha, but 2000s always trade at a premium, don’t they?” Usually they do, yes, but Amphora clients are well aware that we have been banging this very drum about the Mission HB 2000 for some time now, precisely because there was no premium. The Mission HB 2000 premium is a distinctively post referendum feature, and whilst it is encouraging to see it coming through, at last, it is a reminder that we should start picking up the 2005.

Next we are drawn irresistibly to Trotanoy 2008, unmoved over 12 months, six months, and since the referendum vote. So, what’s going on here? The Pomerol vintage in 2008 was more than respectable, claiming a grade of 96 from Robert Parker. To put this in perspective this was the best grade since 1998, equal to 1989 and 1990, and even the iconic 1982. It is only surpassed by the 98 achieved in 2009, so it was a pretty good year, all in all.

Trotanoy didn’t disgrace itself that year, producing a wine of which Parker has said: “One of the superstars of the vintage, the Trotanoy 2008 is a wine that transcends the vintage.” He accorded it 96 points, much the same as the 96+ from 1998. So, same vintage score, almost exact wine score, similar price, right? Wrong!

The Trotanoy 1998 trades at the princely sum of £2,878. The 2008? £1,340. That’s right. You can get 2 cases of 2008 for less than one case of the 1998. Occasionally the market throws up extraordinary morsels like this. Here is the great man drawing the comparison: “The greatest Trotanoy since 1998, 1982 and 1961? I always thought the 1998 was the modern day reference for this estate after 1982, but the amazing 2008 appears to be even denser and richer with higher, yet even sweeter tannin. It should prove to be a monumental wine as well as a legend in the making.”

Friends, what are you waiting for?

*Close followers of this market place might recall that the other big early mover in respect of the 2005 “retrospective” was Mouton Rothschild, which rocketed from £3,600 to £4,400 in the first two months of 2015. Buyers at that point were rewarded with something of a black eye later because the eventual regrade dropped it from 99+ to 97. In fact, the leap was in this case was the result of an upgrade in December 2014 from 96 to 99+, leading observers not only to acknowledge the power of the Parker grading system, but also caution against “dead certs”.

Philip Staveley 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 Amphora Portfolio Management