Good Vibrations
As we have been at pains to stress over the last few months, you don’t make money betting on “the turn”. In stock market terms, more money is lost at imaginary turns than at any other point in the investment cycle. It is far more important to establish when there has been a turn, and act accordingly. This rather begs the question as to why investment banks pay so much money to people to make forecasts, when those forecasts scarcely if ever come to pass, but that’s another story.
One of the beauties of the fine wine market is the diversification that is permitted given the range of regions for wine production globally, the number of producers in those regions, and the number of vintages available for investment. This means that, as with a stock market investment plan, the weightings can be adjusted in accordance with whatever might be happening behind the market.
Over the last few months there have definitely been encouraging signs, but these aren’t the first encouraging signs we have seen over the last couple of years. The Liv-ex 100 formed a promising bottom in November 2012 only to see enthusiasm evaporate with the clumsy 2013 en primeur campaign. Quite simply, the 2012 vintage wasn’t sufficiently good to justify the prices the chateaux tried to achieve.
So the consolidation continued, but this hasn’t all been a total waste of time. Over the post 2012 period a broader range of investable wines, from the New World, from Spain, and particularly from Tuscany, entered the investment arena with a vengeance, and this has broadened the market out for everyone.
(Liv-Ex 2 year Rest of the World 50)
Maybe now, however, the landscape is changing. Consecutive rises in monthly Liv-ex 100 closes since July; a positive 6 weeks on the Liv-ex 50; Robert Parker has upgraded several wines of late; the whole 2005 vintage has flown off the shelves in the last ten days; Asia is hoovering up stock in a meaningful way, (although there is always the possibility that this is more a consequence of Chinese New Year than anything longer term).
What this says to us, is that we start to address the underweight positions we have been running over the last couple of years on the Left Bank, particularly in the First Growths. We wouldn’t be barging into overweight territory yet, but we have seen enough to suggest that brighter days may be ahead. There seems to be particularly good relative value in the 1996 and 2003 vintages of Lafite, Latour, and Margaux; the recently upgraded Mouton 2005 and the 2005 Haut Brion; and all the 2008s still seem to score like an on-vintage but be priced like an off.
Amongst the Superseconds the Montrose 2003 and 2010, and the Cos D’Estournel 2005 stand out, and on the Right Bank the 2008 Pomerols are for the most part still absurdly cheap.
If you want a portfolio review or would like to hear more detail about our current market views, please get in touch and we can explore the opportunities with you further.