Tag: Investment Staples

Investment Staples: new wines (and whites!) for your portfolio

Certain wines are a safer store of value than others. One of our four Wine Lister Indicators – Investment Staples – enables you to spot these instantly. The bespoke algorithm identifies wines of a high quality level, long-lived and not too old, above a certain price (therefore soaking up the frictional costs of collecting wine), with proven price performance, stability, and liquidity.

This last criterion is measured using the number of bottles traded at wine auctions globally. With the latest quarterly data in from Wine Market Journal, 16 new wine and vintage combinations (across nine producers) have recently become Investment Staples. These wines are all over £50 a bottle, with the majority falling under £400, but the most expensive – Roumier’s 2013 Musigny – costing £4,851.

Several of the new Investment Staples have displayed an upward price trend over the last six months, in particular Leroy’s Vosne-Romanée Aux Brûlées 2013 and Roumier’s 2008 Musigny, both of which have seen increases upwards of 30%.

Wine investment is not often associated with white wines, but six of the new Investment Staples are just that. All possess staying power, and are young enough to have room for improvement. What is more, they are made by some of the finest wine producers there are, allowing them to challenge some of their red neighbours in terms of investment fundamentals. Of these, Roulot’s Meursault Charmes 2012 has the best six-month price performance, plus one of the longest drinking windows based on the average assessment of our partner critics. Jean-Marc Roulot has been a rising star for several years now, but his wines are still in the ascendancy.

The new Investment Staples nearly all hail from Burgundy, with just a handful of entries from Piedmont and the Rhône. Those seeking something a bit different that still possesses the criteria of a solid investment might look to Italian white, Gaia & Rey 2012 from Gaja, which has a drinking window of 2015-2025, 6.3% six-month price performance, and price tag of £124.

August Investment Staples Image

To search for more Investment Staples, subscribers can click here, filtering by country, region, type, style, price, and score, to drill down exactly into what wine you’re after.

Latour 2007 ex-château release

Today saw by far the largest release of Latour direct from the cellars since the property withdrew from the en primeur system starting with the 2012 vintage. Château Latour has released c.3,000 cases of its 2007, the first real test of its new distribution strategy, and reports from the Place are positive. Courtiers and négociants say the price has worked (for the first time the ex-château stock is released at market level, with no “provenance premium”), and report that the entire parcel has been sold, with demand “very strong”.

Using Wine Lister’s unique combination of data, we’ve created a visual guide to this exceptional château and its 2007 vinatge:

latour-thumbnail

You can download the slide here: latour-2007-slide

Post-referendum portfolio diversification

In a new climate of Brexit-induced uncertainty, with volatile fund performance and some economists forecasting recession, can fine wine offer some shelter? Research has consistently shown that wine has weak correlation with traditional financial assets, and can therefore be a useful diversification tool. Moreover, returns have been attractive historically, and less risky.

Risk Reward

Attractive growth

The graph above shows returns since June 2007 for fine wine, gold, and three major stock indices. In spite of the fine wine bubble bursting in the summer of 2011, wine has produced the best annual returns over this period, at 8%.

Note that for this analysis we have used our price data partner’s Wine Owners 150 index, which contains a range of wines from different regions and at different price points. This further underlines the wisdom of diversification at every step – a wine portfolio made up solely of Bordeaux first growths would not yet have regained losses suffered in 2011. It should also be noted that the performance of the WO 150 index does not take into account frictional costs associated with fine wine collecting, namely storage, insurance, transportation, and sales commissions.

Low risk

What about the risk profile of fine wine? Despite surpassing the S&P 500, the FTSE 100, and the Hang Seng in terms of return, fine wine displays less volatility. It is also less volatile than gold, while providing similar returns over the nine-year period.

Low correlation

Finally, we ran our own analysis to confirm fine wine’s low correlation with stock markets over the same period – in mathematical terms, the index demonstrates correlation of 0.41, 0.03, and 0.15 with the S&P 500, Hang Seng and FTSE 100 respectively (where 1 is complete correlation, and -1 denotes mirror opposites). Fine wine behaves similarly to gold, often viewed as a refuge value in times of financial turmoil – the two show correlation of 0.8.

To take the plunge?

Fine wine seems to possess at least three characteristics making it a viable – and even attractive – alternative asset; a safe haven in tumultuous times. Independently of Brexit-fuelled uncertainty, now might be an opportune time to buy into wine, as it has shown steady – but not bubble-inducing growth since the beginning of 2016.

As a non-mainstream and (ironically) illiquid asset class, fine wine should only ever make up a small proportion of any investment portfolio. And, of course, it is a multi-faceted, non-fungible asset, ultimately made for drinking and enjoying, so we recommend that any notion of investing in wine always be secondary to its primary appeal, and undertaken with expert advice!

See Wine Lister’s Investment Staples and filter by geography, price, score and more.

For more information on a specific wine – relating to quality, brand, and economics – click on any wine and open out the category bars.

Disclaimer: the opinions expressed in this post or elsewhere on the Wine Lister website do not constitute investment advice.