Fine wine investment: ‘bargain’ Ausone

At Amphora Portfolio Management I think we could fairly be accused of having a bit of a thing about Ausone. Those of the investment committee who are confessedly oenophiles first and investment gurus second wax lyrical about the incredible history of the château, its place in the hierarchy of Bordeaux producers, and so on. Those who are principally investment-orientated have found plenty of anomalous pricing over the last few years to get excited about, even if it has seemed, at times, a long wait.

One of the frustrations for the latter camp was the lack of interest shown by China when it entered the fray with such gusto a decade or so ago. It now seems that for this new entrant Ausone lacked the brand name and the price points at any vintage level to represent an attractive enough proposition. All this did, though, was give keen market watchers a fabulous opportunity, one which has borne rich fruit over the last 12 months.

Only two vintages this century have not risen in the last 12 months, namely the 2009 and 2010, and we have written about these relatively recently.

In that note we warned about how expensive the 2010 looked, and it has responded by falling 20% this year.

That said we have also been at pains to stress on countless occasions how undervalued many 2008s are, on both sides of the Gironde, and the Ausone 2008 has had a fabulous start to 2017, rising some 15%. Various others such as 2003, 2004 and 2005 have also recorded significant gains this year, leading to the inevitable question: are there any Ausone bargains left?

The happy answer is in the affirmative, and the attractions of the 2012 are being evidenced within our proprietary algorithm at these levels. 2012 was an indifferent vintage in Bordeaux, better in general on the Right Bank than the left, and actually not bad at all in Pomerol, where the Robert Parker score is a very creditable 92. St Emilion registers an 89 making it one of the better off-vintages.

So what’s the story for the 2012? Parker’s rating for the Ausone is a heady 96+, a very good effort in an off-vintage. He says: “This will be one of the profound 2012s….. (it) is one of the candidates for wine of the vintage”, so evidently no slouch.

When we compare the price to several lesser rated off vintages its relative value emerges quite clearly.

There are cases around in the market at £4,000 or thereabouts. We think investors should be taking advantage of this opportunity while it still beckons.

Elsewhere one of the key questions for 2017 is when, if ever, the Left Bank will concede leadership of the market. It led the market up through to mid 2011, led the correction and subsequent consolidation period when regions like Tuscany and Napa came to the fore, and it has obviously been in the forefront of the rally since mid 2015.

A close analysis of performance year-to-date suggests that a changing of the guard may already be happening. While most vintages of first growths have started the year firmly, none have gone off like the proverbial startled faun. If we focus on Tuscany, however, we notice that the outperformance table is littered with vintages old and new from Masseto, Sassicaia, Tignanello, and Ornellaia.

You have to be a bit careful when you go back to the 1990s in Tuscany because liquidity can be quite sporadic. For example, the Tignanello 1997 is theoretically up 40% on the year-to-date (ytd) but it simply hasn’t traded in living memory and at the Liv-ex market price of £1,510 you would be very hard put to find let alone offload any. Similarly the Sassicaia 1998 is theoretically down 25% ytd but that fall is from a level at the end of last year which saw prices posted but no volume at all as far as we can determine.

You are on safer ground as to liquidity in more recent vintages and here too there have been some meaningful rises. Sassicaia 2012, Ornellaia 2009, 2010 and 2013, Tignanello 2010 and 2011 are all registering significant gains, with liquidity in the market to back them up. Masseto is currently less evident but we believe this creates an opportunity.

We first alerted Masseto 2010 to investors as a good hiding place away from a precarious Bordeaux sector back in 2013, and it did the trick at that time. Now we believe it is time to revisit for a different reason. It is very cheap in relative terms, it is the second best scoring Masseto ever, at 98 points (second only to the 100 point 2006, against which it trades at a 45% discount). It is over 10% cheaper than the lower-scoring Massetos from 2008, 2007, and 2003, and 20% cheaper than 2005 and 2002. It is a bargain at these levels. Buy Masseto 2010.

Finally, Château Latour is about to release a tranche of its 2005 vintage. You will recall that Latour exited the en primeur market post the 2012 vintage and has started to release ex chateau wines which are entering their drinking window. This year it is the 2005.

The argument is that ex-château stock has additionally secure provenance and therefore justifies a premium. At Amphora we are sceptical of this, partly because we believe that wines which have never left the bonded warehouses have perfect provenance anyway, and partly because this represents new supply to the market, which in the absence of a pick-up in demand will depress the price.

We reiterate our basic view on the 2005s. There will never be another Robert Parker-tasted retrospective, so future up or downgrades are only going to come from his colleagues whose influence on the market is as yet uncertain. The only 2005s investors should be comfortable holding are RP 100-point scorers, simply because of the scarcity value in consequence of there never being any more.

Don’t get sucked in to paying over £7,300 for Latour 2005 when perfectly respectable stock is on offer at £6,800, and isn’t great value at that level either.

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.