Missing a trick


“Quelle dommage”, as they would say in Bordeaux. Last weekend the Sunday Times ran an article in its ‘Money’ supplement about alternative asset performance and seems to us to have somewhat missed a trick. True, it trotted out all the recent performance figures, which are helpful to a point, but it failed to address the altogether more interesting angle which we might call ‘audience participation’.

If I read a newspaper it tends to be in the hope of some sort of enlightenment. The days are long gone when you picked up a newspaper to find out what is going on. Everyone knows what is going on. Floor to ceiling media immersion is how the world is now, and while I fully accept that it may have come as a surprise to many Sunday Times readers that alternative assets were doing pretty well, it absolutely begged the question: so, what can I do about it? From that perspective the article seemed to be targeting people who already knew the answer and had already garaged their £250,000 motoring investment, but we wonder how many of the readership have that level of disposable liquidity? This gets to the heart of the Amphora Portfolio Management crusade.

To our way of thinking, fine wine investment offers a flexibility that is difficult to find among other alternative investment channels. This is obvious when you compare classic cars or fine art, for example, where the prices of individual pieces are high in absolute terms.

But it is also true in markets like those for stamps and coins, where it is their very rarity which is of perceived value, and where rarity is the key determinant pricing is conditioned purely and simply by what one individual is prepared to pay against another individual, and this is very different from what we might call “crowd markets”.

Crowd markets exist where there is fungibility. If it is possible for lots of people at the same time to buy cases of Lafite 2010, and it is, then you have a crowd market. It is simply not possible for lots of people to buy Penny Blacks or 1846 $2.50 gold piece American Eagles (stamps and coins respectively, by the way), at the same time. If it was they wouldn’t be scarce, and then there would be no point.

What this means is that while you can track the various indices for these avenues of delight, you cannot mirror them, and if you can’t mirror a benchmark your risk profile goes off the scale. That is the beauty of a benchmark. It gives you something not only to measure your performance against, but to be guided by.

Let’s say you are swayed by the alternative asset argument, what are you going to do about it? Clearly there is no guarantee that whatever you purchase in a non-crowd market is going to behave as you hope it might. Your ability to sell it at a profit at some point along the line is determined entirely by the state of a whimsical market place, and certainly not by any reflection of a benchmark. Sure, you will have had the pleasure of ownership, which hopefully will have been wonderful, but it is that which distinguishes a collector from an investor.

This is the reason we at Amphora think you have to be careful about the discussion of an alternative investment class, and whereas we believe fine wine can be both an investment and a collectible, most other alternatives can only be collectibles.

Meanwhile, further to last week’s note we have received a lot of enquiries about Dom Pérignon which has gone into plenty of portfolios over the years, and we should stress that last week’s recommendations weren’t the only things we’d buy on the bubbly front. This week therefore we’ll broaden the scope of enquiry to include DP white and rosé.

To a degree Champagnes are easier to analyse and filter than wines because they only crop up from time to time. Although, as we have pointed out, Krug favours its Grand Cuvée quite unashamedly, it is a reasonably open secret that other producers are incredibly proud of their blender’s art, and tend to focus on their vintage Champagne mainly for marketing expediency.

Proud the producers may be but blended Champagne is beyond the purlieu of the investor for many reasons, price point and abundance being but two. At Amphora we are happy therefore to focus on the narrower field, a field narrowed further by the fact that a vintage will only tend to be released some considerable time after harvest. As we all know Krug 2002 only came out last year.

The first thing to note about Dom Pérignon is that the Wine Advocate scores tend to be higher than the Juhlin scores. Richard Juhlin scores every rosé under discussion (2000, 2002, 2003 and 2004) 93 points, although he does wax lyrical about the 2000 (“a sensual masterpiece to make love to”!). We have to look to the WA for diversity as to scores, and it gives the above four vintages 96, 98, 94 and 96 respectively.

Pricing follows the WA, the most expensive at £2,660 being the 2002 (98 pts), with the 2000 (96 pts) at £2,300 followed by the 2003 (94 pts) and 2004 at £2,100 (96 pts). This makes the 2004 the bargain of the group being almost 10% cheaper than the same-scoring 2000.

Turning to the whites, where there is no 2003, the most expensive paradoxically is the lowest-scoring 2000 at £1,650 (WA 94, RJ 92), followed by the 2002 at £1,340 (WA 96, RJ 93.8), and the 2004 at £1,050 (WA 95+, RJ 94). By all measures therefore the target should be the 2004.

At Amphora we have supported the Dom Pérignon 2004 for some time, and for the above reason still do, even though we accept that in overall vintage terms 2002 is considered better than 2004. When you look at the chart it becomes even more persuasive:

For the best part of a year the price has been flat, while the Champagne sub-index of the Liv-ex Fine Wine 1000 has motored merrily ahead.

We reiterate our recommendation: buy Dom Pérignon 2004.