Fine wine investment: Beyond Bordeaux

Over the last couple of weeks we have seen the market in index terms continue to consolidate. At times like this the leadership will tend to rotate, and sure enough the out-performers since mid-November have come from a broader front. We note that many of these are back vintages from the 1980s and ’90s and in many cases are very thinly traded indeed, so it is important not to take too much of a cue from the occasional trade of a wine at a very different price from the last occasional trade of the same wine.

Bringing the more recent vintages into focus, where there will typically be more liquidity, we find some action in more expensive wines like Le Pin and Petrus, although nothing compared to Domaine de la Romanée-Conti’s Romanée-Conti 2005 which in “Liv-ex market price” terms has moved from £155,000 to £195,000 for a case of 12. Caveat emptor! To compare other vintages of this legendary wine, have a look at the fine wine price checker on Amphora’s home page.

There is also more going on outside of France, and in this week’s focus we will look at some favoured vintages from Tuscany and Napa Valley. Producers from these regions have featured quite prominently in the price movement stakes over the last month or so, and indeed when the focus does eventually shift away from Bordeaux these are wines which will likely lead the way.

Ornellaia 2009 is a very special wine. It is produced by the makers of Masseto and anyone who has read the recent Liv-ex interview with Giovanni Geddes de la Filicaja, CEO of Ornellaia and Masseto, will be aware of how differently the producer pitches these two wines into the market.

As we have written in the past, production levels are a key determinant for wine pricing, and whilst Masseto only produces some 2,500 cases each vintage, Ornellaia produces over 10,000 cases. There is therefore a marked disparity in pricing.

In 2009, however, Ornellaia excelled itself. It was a very good vintage, to be sure, but when we read Antonio Galloni writing for Robert Parker’s ‘Wine Advocate’ expressing the view that in this year Ornellaia is a more complete wine than Masseto we sit up and take notice.

The most comparable Ornellaia is the 2006. It shares both the same vintage score as the 2009 (97), and the same individual wine score (also 97). It does not share the same price. Here is the chart:

This discount may have always been there, but it is unjustifiable.

For Masseto, 2010 is the plum year, in investment terms. According to the Amphora proprietary algorithm it is the unequivocal stand-out ‘buy’.

Amphora started recommending purchase of this wine in the dark days of 2013 when Bordeaux was still firmly in consolidation mode. It was important at this point for fine wine investors to continue to reduce the weighting of Bordeaux, which dominated most portfolios at that time, and Masseto 2010 fit the bill perfectly, costing £4,000. It moved quite smartly up to £5,000 before itself pausing and trading between £4,500 and £5,000. It is still great relative value at this level.

At the same time we encouraged investors to buy wines from the Rest of the World, names like Opus One and Dominus dominating proceedings, and for those either still underweight this region, or concerned that Bordeaux is about to pass the baton, we would like to share the attractions of one wine from each of these producers.

We first started buying Opus One 2010 for clients at around the £1,800 mark, and it has performed very well, now breasting £3,000. In fact against other Opus Ones this is not desperately expensive, on a relative basis, but a 60% return over a couple of years in obviously not to be sniffed at.

The 2010 scores a highly respectable 96 points from Robert Parker, a score matched by the 2012, which we started buying for clients at £1,750. The 2012 vintage is actually slightly better than 2010 in Napa Valley (96 against 95), so you might expect the 2012 to more or less keep pace with the 2010.

The instruction is perfectly clear: there is still time to hoover up some 2012.

We have discussed in the past the relative merits of Dominus against Opus One, reflecting on the curiosity of Dominus achieving the higher scores, whilst Opus attains the higher prices. This curiosity is all the greater when you acknowledge that Opus produces around 25,000 cases per vintage, and Dominus a mere 7,000. For the moment it is what it is.

Within the house of Dominus the Amphora algorithm is pointing four-square at the 2009. Here is the visual:

This is a perfect example of how fine wine investment has moved (some might argue somewhat sluggishly) with the times. In the past investors might have heard the advice: “buy a top-scoring wine from a top producer in a top vintage and you can’t go wrong”. Apart from being extremely lazy advice, it is demonstrably wrong.

Most markets, even those as inefficient as the fine wine market, have some price coherence. What that means is that quality tends to be priced in; that’s why 100 pointers cost more. As you can see from the graphic above, the Dominus 2010 costs so much more that in relative value terms at current price levels it is a non-starter for an investment portfolio.

What is not a non-starter is the 2009. You can buy it for £1,350. We recommend you do just that.

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 with Amphora.