The currency of wine continued

19.09.17

Such was the interest created by last week’s currency note that we have been asked to investigate further, and as the real shock arrived with the referendum result we have taken the analysis back to that point. The question therefore becomes: which wines have underperformed most over the full period of sterling weakness, (which has otherwise tended to benefit the overall market), and which still represent good value on the Amphora proprietary algorithm?

As far as causality is concerned, a question which arose several times from respondents to the note, it does not follow that a wine which has underperformed the broad market will inevitably show up well on the algorithm. The reason for this is partly explained by performance prior to the currency shock. The algorithm is a snapshot illustrating relative value right now. It is entirely possible for a wine to have outperformed prior to the shock leaving it open to underperformance since, but that earlier outperformance might still result in it looking expensive against the rest of the market now.

A good example is Ausone 2009. This is the performance against the Liv-ex 50 over the last 2 years:

but this is where it sits in the algorithm:

Amphora Algorithm Ausone

That is a 36% underperformance against the index but we are still not buying!

What we are inclined to buy though is Ausone 2012. It seems at the moment that no Amphora recommended list would be complete without a smattering of 2012s, and this one is no exception. We all know by now that the 2012 vintage wasn’t too bad, sandwiched between the considerably more challenging 2011 and 2013 vintages. In St Emilion it scored a decent 93 points, matching the great 2009, as it happens.

Come pricing-time the market had reached the point marked on the chart below, in Liv-ex 100 terms, so you might have hoped the producers would be more realistic:

In Ausone’s case I think the evidence is that they were a bit more realistic than some. This chart shows the issue prices of successive vintages from 2010 to 2014:

Chateau Ausone

Fine wine investors should take note of what has happened to the 2014 earlier this year. This wine scores 95 against 96 for the 2012, and the overall vintage score is a marginally inferior 92 in St Emilion in that year. Ausone 2012 has considerably underperformed the index since the referendum; it is the top scoring vintage in the algorithm. It is better than the considerably more expensive 2014.

What are you waiting for? Buy Ausone 2012.

Staying on the theme of First Growths (of which Ausone is a Right Bank equivalent), we find three further tasty morsels. We talked last month about Margaux 2005, and it also fits the current bill of underperforming over the time frame, and being attractive as far as the algorithm is concerned. We should also highlight Latour 2006, since June 23rd 2016, beating only the 2000 and the 2005 vintages. The 2000 isn’t badly priced for those who don’t mind a hefty millennium premium, and the 2005 was torpedoed as much by an absurd ex chateau release as anything, but it is the off-vintages which show up on the algorithm for Latour, largely because they trade at such a considerable discount to the on-vintages.

Most of the off-vintages have had a decent rally actually, so we are tempted to think they were extremely undervalued prior to the referendum, and as the current study identifies recent underperformers it is the 2006 that takes the award. By comparison the others are up around 20% whilst the 2008 has risen as much as 30%. None of these, it should be pointed out, are expensive on a relative basis at these levels.

Mouton 2010 is the third of this group, having risen 9% to £5,760. Mouton is quite different from Latour from an algorithmic perspective, in so far as it is the on-vintages which hog the value limelight, aside from the extraordinary 2000 vintage, of course, which continues to defy gravity, currently on offer at £17,500 per case of 12. Both Moutons 2009 and 2010 have underperformed actually, the 2010 being the worst of the family.

What is interesting here, in addition, is that in January this year Neal Martin downgraded the Parker score of 99 to 97 points for the 2009, and upgraded the 2010 from 97+ to 99, so those who believe in the ongoing divinity of Parker might opt for the 2009 whilst other investors might choose the 2010.

Back across to Margaux we have the Palmers 2002 and 2009 raising their hands for a bit of tlc, having risen only 8% and 11% respectively. The performance profile of these 2 wines could not, up to the beginning of 2016, have been more different.


The 2002 was barely troubled by the 2011 correction, simply consolidating for a few years around the £1,250 mark. By contrast the 2009, considered “over-priced” along with many others come the 2011 correction, declined in line with the Liv-ex 100.

Both awoke with a start in early 2016, a fairly consistent refrain amongst many Chateau Palmer vintages, but whilst some have marched up handsomely, in fact 10 out of the last 20 bottled vintages are up over 30% in the period under review, these two tag along behind, and are now worthy of closer inspection, not to say acquisition. Both have exactly the same score on the algorithm, 6.39, whilst the rest sit within a 4 to 6 point range (the bigger the number, the better the relative value).

Meanwhile we note with interest that the market has taken Sterling’s recent strength in its stride. This should neither fill fine wine investors with either too much comfort or too much alarm. It is very early days in this stronger Sterling phase, and the fine wine market is not necessarily so efficient as to react immediately. At any rate we at Amphora believe that the market is currently well-grounded and as suggested last week we are minded to stay fully invested at this point.