Tuscanomalies

12.12.2019 – Invest in Fine Wine –

One of the things any investor should be trying to do is seek out anomalous pricing, which is easier in an inefficient market than in one which is uber-analysed as all mainstream markets are now. Some time ago we at Amphora discovered what became known as the class of “Pomerol anomalies” when we identified identical vintage scores, 2008 and 1998, almost identical individual wine scores, yet pricing which was very different. Investors who followed these disclosures to their logical conclusion (and bought!) became very happy indeed.

It might seem surprising how seldom regional vintage scores match, but when you consider they are driven by climatic conditions it is expecting quite a lot for timings and quantities of temperatures, rainfall and so on to match in different years. In Bolgheri, as it transpires, 2013 was very similar to 2004.

Whilst these are both “on vintages” scoring 95 points it is fair to acknowledge that 2009 was even better at 97 and 2016 at 96, nevertheless in such a year as a 95 point vintage you might expect the producers to deliver some excellent wines. Although there were no maximums, we have 97s from Masseto and Sassicaia and 96 from Ornellaia. Solaia and Tignanello, the other “Super Tuscans” are from Chianti, which enjoys its own (different) regional vintage scores.

If we examine the individual wine scores for 2004 and 2013 we find as follows: Masseto 97 and 97 respectively; Sassicaia a rather disappointing 90 and 97: Ornellaia 95 and 96. That Sassicaia 2004 score might need some explanation. Monica Larner for the Wine Advocate is almost apologetic in giving it a 90 suggesting in 2017 after the tasting that “perhaps our samples weren’t perfect”. Some critics are more generous with an average Wine Searcher critic score of 93, but it is worth noting that Jancis Robinson is also sceptical, giving it 17.5 (out of 20, in her case).

Once again we have some good points of comparison, and whilst the algorithm is usually a critical tool for appraising relative value, in vintages like 2004 and 2013 in Bolgheri we might reasonably expect pricing to be similar, with a nod to the older vintage to express the greater scarcity. How much of a nod, you might well ask?

Here we are indeed beholden to the algorithm, which takes account of the aging factor.

Masseto 2004 has a Liv-ex market price is £6,840 per case of 12. All things being equal, in other words, for it to have the same algorithmic score which takes account of the 9 years of aging, the 2013 should be £6,000. You can buy it for £5,300.

Sassicaia 2004 appears on the platform at £2,050. Because of the WA score referred to above and taking account of a Wine Searcher average critics’ score of 95 for the 2013 versus 93 for the 2004, the 2013 should be £2,150. How does £1,540 sound to you?

Ornellaia 2004 is £1,852 per case of 12. You know the drill. The 2013 should be £1,700 but sits miserably down there at £1,300.

The inference is clear: the 2013s for all three look considerably undervalued and therefore ought to be considered for purchase.

We checked out Solaia and Tignanello over in Chianti for any similar anomalous revelations. There the relevant vintages would be 2006, 2010 and 2013, all scoring 96 points. As it happens the wines are rated differently so this fact and that we are talking about 3 vintages not 2 drives us back into the arms of the algorithm. Simply put, the findings aren’t so blindingly obvious. In each case the 2013 is not only the highest scoring but also the cheapest. Let’s just buy that one then!

Super Tuscans

Such a strategy of increasing weightings towards Italy speaks very much to the theme we have been discussing in recent weeks, namely the benefit to non-French markets of the Trump/Macron trade spat. You can speculate all you like about how this may play out in the future but the facts are simply that there is decreasing trade in Bordeaux wines currently and wines from the USA and Italy are outperforming.

Shouldn’t we be increasing weightings to the US in addition? The difficulty here is that there are 2 US producers with a liquid secondary market, and several which are more in the Burgundy/Barolo bracket. You can usually find bids for Opus One and Dominus if you don’t go back in time too far, whereas Screaming Eagle and Harlan Estates enjoy more of a “cult wine” status. These you might find in a larger portfolio where the risk of not being able to sell precisely as and when you would like is mitigated by liquidity elsewhere.

In recent weeks we have explored the broader reaches of the Italian fine wine space and found an exciting world of Barolo and Barbaresco wines which may one day become as frequently traded as required by a regular investor in fine wine. Mouth-watering as they are we regard them currently as attractive but higher risk, so perhaps don’t yet build a portfolio consisting principally of wines from Piedmont. Whilst you buy the odd one to have skin in the game remember the bargains to be had further south. Any of the above Super Tuscans from 2013 will do the trick nicely.