First Growth Targets
As more time passes, we move inevitably closer to a rebound. But we also know that more fine wine investments are being hit by betting on the change of direction than at any other point in the cycle.
This does not mean a balanced portfolio should have no First Growths.
It does however, mean two other things. If you currently have First Growths in your portfolio, chances are they’re underweight. If you’re looking to include them in a future portfolio, you should choose carefully.
A word on ‘weightings’ in fine wine investments
Weightings are a solution to the risk of exposure in any market place.
Nobody knows exactly when a market’s attention will switch from one country/sector/wine producing region to another, so a balanced portfolio should seek exposure to a variety of areas. If you have no First Growths in a portfolio and they start to improve, your performance is negatively affected, since you’ll end up chasing rising prices.
To have equal weightings is inefficient, because it ignores what’s happening in the market at any given time. For example, we’ve been banging the drum in favour of fine wine investments like the Super-Tuscans for the last nine months or so, which have a lot of upward momentum.
For that reason, we’ve weighed our recommendations in their favour. But regions like Left Bank Bordeaux could move at any time, so we maintain sufficient, if not underweighted, exposure to them.
Back to the First Growths
The price movement we have seen over the last few months has highlighted a series of anomalies that we should draw your attention to. You’ll often hear an off-the-cuff explanation like ‘oh, that’s the Millennium effect,’ or ‘it’s a 100 point scorer’ – but that hardly constitutes coherent analysis.
It may come as a surprise, but there is quite a bit of logic behind First Growth prices, which makes us all the more suspicious of the anomalies. There are plenty of variables behind the prices of fine wine investments, but we sometimes find a study into the cost of wines per Parker point helpful.
At present, the ‘off vintage’ costs are all priced ‘correctly’, in so far as there is little difference in cost per Parker point.
The spread in costs for off vintages looks like this:
- Lafite: £55-£58
- Latour: £38-£40
- Mouton: £32-£34
- Margaux: £31-£33
- Haut Brion £27-£28.
The Mouton off vintage ‘outlier’ at £36 per point is the 2006, which as 98 points was the ‘wine of the vintage’.
There’s a much bigger spread in ‘on vintage’ prices, and it’s here that we find a series of curious anomalies. Not all anomalies will be ironed out over time, but it stands to reason that taking these into consideration will lead to better fine wine investments decisions.
The millennium effect in fine wine investments
‘Wine people’ will often nod sagely when the ‘Millennium vintage’ is mentioned. But does it really make sense to buy the Lafite 2000 at £12,500 (£127 per point) when you can spend £7,800 on the 100-point 1996 (£78 per point)? Or even £6,600 on the 100-point 2003 (£66 per point)?
The Mouton 2000 has a pretty label, to be sure, but scoring 96 points, it comes in at £10,700. That’s a staggering £111 per point, against the £52 of the 99-point 2009. That’s a premium of over 100 per cent.
The Latour Millennium premium sees it cost £7,600 for its 98 points. Set that against £5,400 for the 99-point 1996 and £6,700 for the 100 point 2003. But in Latour’s case, the premium is exceeded by the 100 point 2009 and 2010, which cost £9,300 and £9,850 respectively.
In Margaux’s case, you can at least give it the excuse of being the wine of the vintage. The 100-point screamer costs £6,750, which sits at a healthy premium to the next most expensive Margaux, the £5,700 of the 100-point 2009. Poor old Haut Brion 2000 hardly merits a premium at all. In fact, like the Latour, it trades at a big discount to the 2009 and 2010 vintages.
Invest in fine wine – without the anomalies
The best way to maintain First Growth exposure from this point onwards would be to avoid the anomalies. To investors, these are largely incomprehensible from a fine wine investments perspective. Instead, here are some other vintages worth owning:
Lafite 2008, 98 points – £5,300
Cheaper than all the other ‘off vintages’ despite having the best score.
Latour 1996, 99 points – £5,400
By far the cheapest ‘on’ vintage. Compare with the 96-point 2005 at £6,550.
Mouton 2005, 96 points – £3,400
The premium over the 95-point 2003 has evaporated in recent months. There is no premium accorded to it being an ‘on vintage’.
Margaux 2003, 99 points – £3,950
Massive discount to the 98 point 2005 (£5,300) and all other ‘on vintages’.
Haut Brion 2003, 95 points – £2,250.
An ‘on vintage’ trading at a discount to inferior scoring ‘off vintages.’
London wine investments
Predicting the fortunes of fine wine investments isn’t easy. If it was, everyone would do it. And if you’re looking to get the most out of your money when you invest in fine wine (who isn’t?), it certainly helps having some expert fine wine investments analysis to hand when you assemble your portfolio.
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