First growth fine wine market making moves in the right direction
First growth fine wine market making moves in the right direction
December 2014
Dear Friends and Clients,
Good News! Over the last few months there has been a steady increase in activity on the Bordeaux market, some vintages have shown small incremental gains but most importantly activity has improved. Meaning there are more active buyers seeking out first growth stocks. Though bargain hunters are still in force and offering to buy lower than the benchmark prices. This steady, activity build up is a good indicator investors that are buying back into the market are buying for the long haul – could this be a sign of sustainable liquidity with a long term investment view? It seems so…
Merchants who are looking for top Bordeaux wines are scouting around again which is another positive sign. If Merchants are stocking up again on Bordeaux wines then they must be confident prices will not continue to decline. After all given that the Bordeaux market is coming to a close of its fourth year of decline, investors have every right to believe the only way is up.
The First Growth Market is trading at a level below what it was six years ago since 2008 which removes the psychological barrier that prices are still too high. Its clear that the market has wiped out any gains accumulated from the past 6 years. For most people wanting to get back into this market this suggests the market is priced at a nice low entry point.
But the question that still remains is how long will it take to appreciate in value? so lets look at the facts – We know that confidence is low, the Chinese economy has slowed down compared to what it was and it is unlikely that China’s government are going to negate on their plans to stop flamboyant gift giving to government officials as was done in the past. But this is a global market, it is not just made up of China and at some point the demand will put pressure on supply of older vintages and prices will start rising again. Therefore a five year return should be achievable if you decide to place a portion of your cash into First Growth Bordeaux wines. I think we can safely say that the first growth market is more likely to be a medium to longer term investment. We have always recommended you hold onto your wines for at least three years and waiting another two more years is a reasonable compromise for what looks like a stable and secure market for the upcoming future.
When assessing the trading activity of certain vintages it appears that the lower priced vintages are more appealing to the market. There are a handful of first growth Vintages from the last ten years that are now priced below 2500 pounds/case. I’m talking about Haut Brion, Mouton Rothschild and Chateau Margaux. These look like a good place to start if you are considering putting together a first growth portfolio.
The plus point is most of these vintages at 2500 pounds/case are below what they were 7 years ago back in 2007. Now that’s an opportunity to buy first growths at a good price. Even if your only intention is to drink them!
As an example if you had invested 100,000 pounds in 2008 you could of had a basket of around 16-20 first growth wines. With that same 100,000 pounds today you could create an immediate wine portfolio of 35-40 cases of decent rated first growth wines.
If you have an interest in placing some funds into first growths at the moment do let me know. A five year plan with 5-10% per annum return should be worth noting. A steady growth of 5-10% over the next five years will beat inflation and far outweighs any attainable growth from a fixed deposit in the bank.
Nevertheless we can not forget the historical growth of the first growth wines in excess of 300% as past returns clearly indicate that when confidence is high, people are prepared to pay whatever it costs to get their hands on an exclusive bottle of Bordeaux’s finest claret.
We will not be having any individual recommendations on First Growths because our advice is – make a lump sum investment with diversified vintages to allow yourself a basket of wines which can give you the best possible advantage. This is a market recommendation rather than a specific wine or vintage recommendation.
More news to come on our Champagne recommendations which are doing very well. If you have not yet started to add Champagne into your portfolio, you should give it some serious thought if you are looking for a shorter and more aggressive return.
Feel free to get in touch if you have any questions or comments.
Merry Christmas to you and your family – Have a great New Year and all the best for 2015.
