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Fine wine investment: Fight or flight
When you’re in the middle of a crisis you would think it might help to have lived through one before, but any trawl of the mainstream media would have you think most of the reporters have just come out of nappies.
We must remember however that it is not in their interest to find solutions to any given problem but to agonise over it and perpetuate it if possible. You find yourself wondering if (BBC Asia correspondent) Debi Edward’s eyes could possibly get any wider, or if Robert Peston’s teeth-sucking could get any more plangent.
In Yuval Noah Harari’s latest excellent book “21 lessons for the 21st Century” he points out that we willingly gorge ourselves on free hallucinatory nonsense (Mail Online springs to mind), instead of paying a nominal sum for more authentic coverage. Of course sometimes even that doesn’t help. When working in the financial markets I would regularly find myself agreeing with one Barrons article only to find that the piece on the facing page espousing the opposite argument was equally seductive!
You will also have the pleasure of reading about how resilient fine wine prices are at times like this, but how much does anyone want to hear what they should have been doing with their money six weeks ago when it’s hitting the fan so hard right now all you can do is crawl into a hole? We are hard-wired to fight or fly which is why there are so few Warren Buffetts around. People would far rather be day traders when ALL the evidence is they’re going to be no good at it.
The bottom line is you simply can’t tell people how to behave in investment terms largely because they don’t want to hear it and crucially because what is appropriate for one person may not be for another. That is the reason we ask a lot of questions of prospective clients at the start of our relationship with them. It is also the reason we actively dissuade people from investing in fine wine if we think it not for them. The Amphora motto is not: “please invest in fine wine” so much as: “if you are investing please make sure you do it right”.
This is why we offer a free audit of an investor’s wine portfolio to make sure it is doing the job it is meant to be doing.
If you want to do it right one of the things you have to do is buy the right wines at the right time, preferably as part of some sort of overall strategy. As a reduction ad absurdum if you had a portfolio which excluded Bordeaux (because of the US tariff measures, for example) no amount of value in Angelus 2015 would make you buy it. So for anyone for whom now might be the right time to increase exposure, here is a list of wines which are unnaturally cheap.
Angelus 2015 (provided you aren’t one of the above). At 97 points it is rated as an ‘on vintage’ but at £2,500 it is priced as an ‘off’. It is cheaper than any Angelus from 1995 to 2013 and is more expensive only than the 2013 and 2014. With an overall vintage score of 95 points (same as 2016) this is a bargain.
Cheval Blanc 2014 suffers because 2015 and 2016 were 100 pointers but this was a decent vintage (overall score 92 pts) and with a wine score of 95 points this shouldn’t be the lowest cost Cheval Blanc for two decades, bar the 2013 (a very difficult vintage in St Emilion with a regional score of only 82 points).
La Conseillante 2016. This is the highest scoring Conseillante of any vintage available in the market today (98+). The 2016 vintage is the second best ever in Pomerol at 97 points (behind only the 98 point 2009). Conseillante 2009 scores 96 points and costs £2,100. The 2016 costs £840.
Lafite 2016. A knockout vintage on the Left Bank too. Amphora was a big supporter of the 2009 and 2010 at £6,000 and below and they returned handsomely trading now above £7,000. At £5,600 the 2016 offers exactly the same degree of undervaluation.
Stop Press: last week Lisa Perrotti-Brown MW upgraded the 2010 from 98 points to 100. Had Parker himself done this there would have been an immediate reaction. Over time we believe £7,200 will seem a good entry point for a “perfect” Lafite.
La Mission Haut Brion 2014. The stand out Mission is again the cheapest vintage of the past two decades bar the 2013. At 13.57 points per pound on the Amphora algorithm it eclipses everything else and with an overall vintage score of 93 and an individual wine score of 95 it is an upper middle ranking wine at a bargain basement price of £1,400. The nearest equivalent in terms of quality is the 2008 (still inferior though) which costs £1,700.
Market conditions mean different things to different people. There may well be equity investors out there who are rejoicing in this turmoil as a buying opportunity. If there are fine wine investors looking to house some of their funds we believe these wines offer the best opportunity at these levels.
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.