A rising tide
07.11.17 – Wine Investment
At Amphora we spend a lot of time scouring the fine wine investments market for bargains. Occasionally, we take a blanket view across all wine investment regions to see if there’s anything notable from a top-down perspective.
We’ve spoken recently about the value resident in pretty much every 2009 and 2010 second wine. But taking a step back, we find that elsewhere in Bordeaux, 2014 has started to feature predominantly with both Right and Left Bank fine wine investments.
Aside from Italy, 2014 was a decent vintage around the world, earning a juicy 94 in Pomerol and over 90 in all Bordeaux appellations. Superior, in the round, to 2011, 2012, and 2013, whilst not as good as 2009, 2010, and 2015. A rich man’s 2008, if you will.
The First Growths in 2014
Delving into the First Growths in this vintage we find bargains galore. Everywhere bar Latour, in fact, which hasn’t yet been released. Margaux is an interesting place to start, since we highlighted last week how important the regional vintage score is in considerations of relative value.
There isn’t much to choose between the prices of Margaux wines from 2011 through to 2014, which are £3,500, £3,550, £3,470 and £3,500, respectively. Yet there’s a world of difference between the overall vintage scores (87, 89, 80, 90) and a reasonable spread regarding the individual wine scores (93, 96, 91, 95, respectively).
On the face of it, you might think that the single point differential in vintage and wine scores between 2012 and 2014 either way might mean that you should pay just about the same for these wines. But fine wine investment success is all about marginal gains, and the balance of variables which comprise the algorithmic calculations support the 2014 over the 2012 enough to make the points per pound spent 7.35 as against 6.73, where the larger points per pound figure represents superior relative value.
According to the algorithm, therefore, Chateau Margaux 2014 is a 10% better buy right now than the 2012.
Mouton Rothschild gives us the chance to compare a top vintage against a secondary vintage, and helps illustrate the real benefit of the algorithm at work. Mouton 2009 is a top buy if you’re looking for an on-vintage First Growth. It boasts a vintage score of 99, an individual wine score of 97 and costs £5,600. So how does this compare with an, albeit decent, off-vintage 2014 costing £3,500?
The 2014 scores 95 points and the Pauillac overall vintage score is 93, so you’d expect the 2014 to be cheaper in absolute terms. But in terms of relevant value, is the £2,100 discount good, bad, or indifferent? It transpires that the points per pound are very close in this instance, the 2014 edging the day by 7.95 to 7.84. To add context, the egregiously expensive 2000 merits a lowly 2.07 points per pound.
This is actually very helpful when you’re constructing a balanced portfolio that contains fine wine investments from different years, ideally with expressions of both off and on-vintages. Under these circumstances, a diversified portfolio seeking exposure to First Growths would look towards Mouton 2009 and 2014.
Moving into Supersecond territory we find La Mission Haut Brion, which is priced almost like a First Growth in on-vintage years, but very much like a Supersecond in off. We’ve said before that “Mission” 2008 is amongst the best current buys in the market, and the 2014 isn’t far behind. 0.03 points per pound behind, to be precise, which makes virtually no difference. Both are worth buying.
We don’t often recommend Lynch Bages for fine wine investments purposes, because few of their wines stand out as bargains. The prices all tend to gravitate into a similar space. It‘s also quite difficult to find a wine from the 80s off-vintage years which costs enough to offset the storage charges, as can be the case with Superseconds. We tend to prefer wines costing over £1,000 for that reason. When buying something for less there has to be a very good reason.
We note that the older off-vintage Lynch Bages (pre 2005) trade above £1,000, whilst younger vintages cost slightly less, despite both vintage and individual wine scores being superior. The older the wine, the greater the scarcity, the higher the price, is the logic. All things being equal, therefore, the 2008 Lynch Bages (wine score 93, vintage score 91) ought to cost much the same as the 2014 (wine score 92, vintage score 93), perhaps with a 5% allowance for age.
What about the algorithm?
What we find in algorithmic terms, however, is that the 2008 scores 6.62 points per pound, whilst the 2014, which only costs £740, scores a whopping 9.10. It seems to us that this is one of those examples where we should indeed buy a wine for only £740, because it has to appreciate over 20% just to bring it into line with the rest of the stable.
On the Right Bank there are fewer notable anomalies, though we find that the 2014 wines from Angelus, Pavie and Cheval Blanc all stack up very well.
Yet in Pomerol, there are plenty of fine wine investments bargains – but none from 2014. It’s possible that Pomerol producers generally priced in the quality of the vintage better than other regions. A rising tide, they say, floats all boats. There are still a handful of 2014 wine investments below the surface, and we recommend picking them up before the broader market becomes aware of them.
London wine investments
Picking the right fine wine investments for your portfolio is rarely a simple case of plugging your details into the algorithm and seeing what comes out. If it was, everyone would do it. So if you’re looking to make the maximum possible returns when you invest in fine wine, see how the experts here at Amphora Portfolio Management can help
Originally published in November 2017