Off Vintage Superseconds
It has been a very interesting exercise looking at fine wines on a price per Parker point (pPp) basis. It is obviously only a binary view, and Parker scores are only one of the six weighted variables which make up our algorithm, but it provides a decent first filter in the search for pricing anomalies.
Much as it may irritate some observers, and perhaps alarm others, there is little doubt that there is pricing consistency shown across many important areas of the market, from both off and on vintages of First Growths and Right Banks, to on vintages of Superseconds, in terms of price per Parker point.
Latour off-vintages trade between £36 and £38 pPp, Margaux £30-£32, whilst Mouton on vintages are a tight £33-£35. Many people may choose to think that pricing in the Fine Wine market is an exercise in sticking your finger in the air, but this is simply not evidenced by the facts. There is a great deal of rationale on show across the greater majority of the market place, particularly the parts of most interest to investors.
When we look at off vintages of Superseconds, however, some of this consistency evaporates, and this is especially true towards the cheaper end of the space. The Duhart Milon wines from ’02, ’04, ’06 and ’07 range between 89 and 92 points yet all cost £550 a case. The Lynch Bages from ’06, ’07 and ’08 score 94, 88 and 93 respectively, yet all cost £750.
Because storage charges erode investment returns when the underlying value of a case is low (£10 per annum doesn’t seem like much but if you hold something for 5 years that’s £50, which in turn for a £500 case of wine is 10%, too sizeable a bite out of an investor’s profit margin), we at APM tend to recommend cases with a starting price of £1,000 or more.
Out of the 14 Superseconds under current analysis, only Leoville Las Cases, Palmer, and Mission Haut Brion have recent (since 2000) off vintages priced over £1,000, and beyond that there is only one further example from the others. Ducru Beaucailleau 2004, which scores 93 parker points, costs £1,060, an oddity in itself given that highest scoring 95 point 2008 only costs £800.
Another curiosity is that the generally high-scoring 2008 vintage tends to be extremely cheap in comparison with the other off vintages, which is all the odder since 2008 is as close to an on vintage as a Left Bank off vintage can get. The 96 point Pontet Canet, for example, costs £590 whilst the 89 point 2001 sets you back £760. The 94 point Palmer 2008 costs the same as the 89 point 2007 (£1,150), and at Pichon Baron your 95 point 2008 at £730 trades at a very handy discount to the 89 point 2002 (£850).
So what is going on here? We are used to finding (and taking advantage of) pricing anomalies at the more expensive end of the Fine Wine market place, but in the world of the off vintage Superseconds there appears to be relatively little structure to the valuations. This makes it harder to conclude that arbitrage pricing theory will work as well in this area of the market.
But there is also another possible conclusion, one that should encourage investors in the Fine Wine market. Wines of investment grade at the right price (i.e. over £1,000, as illustrated above), show far greater pricing and valuation coherence that those at the cheaper end, and it is far more valuable to find an anomaly in a coherent space than in one which is somewhat less consistent.