If it’s true, as Tennyson suggested, that in the spring a young man’s fancy lightly turns to thoughts of love, then I think we can safely propose that as we approach the end of January, the thoughts of those of a more mature hue must balefully turn to the Inland Revenue.
Not only must tax returns be in by 31 January, but so must other bothersome amounts such as ‘payments on account’, and so on. It is at times like this that we may thank our lucky stars that, in the UK at least, profits on fine wine ownership remain free of Capital Gains Tax.
So as to forestall the first snide remark, that after a year like 2019 you’d be lucky to have any, we should remind investors and potential investors alike that no-one should view investment in fine wine as a chance to make a fast buck. At Amphora we actually try to put off new arrivals should their motives be unrealistic, because quite frankly it’s not worth the hassle. We wasted considerable time last year dealing with someone who conveniently forgot everything he’d been told at the start of his journey in his fury that the market was failing to dance to his time frame.
It may seem a somewhat uncommercial approach but it is only right to clarify at the outset that the terms of investment engagement should be a minimum of three years and ideally longer, and if that puts people off then so be it. Let us once again be clear: the reason for investing in fine wine is the unique investment dynamic, which sees the wine improving as it ages, while becoming increasingly scarce as it is drunk. This process takes time, and during the time it takes it is possible to improve investment returns by viewing the market place as you might the stock market, with prices for different wines moving around all the time.
To that end we have been looking in recent months at Italy which has in its sails whatever wind the market has had to offer, and last week we reiterated our recommendation that Sassicaia 2013 looks a jolly good bet. What is interesting about this is that the Amphora proprietary algorithm highlights this wine as a ‘tall poppy’. It is far and away the best relative value wine in the market from this producer.
The relative value profile elsewhere in Tuscany is more familiar, with Masseto having four vintages offering better value, Ornellaia and Solaia three each. When we say “better value”, we mean better value than the other vintages from the same producer. Whilst in all four cases the 2013 features favourably, for Masseto the others are 2015, 2010 and 2009; for Ornellaia 2016 and 2009; and for Solaia 2010 and 2006.
It is important to have options if you are trying to mitigate risk. It is possible that there is something wrong with the 2013 vintage of which we are currently unaware. Obviously we have researched it pretty exhaustively and if some ill is to befall Tuscan 2013s then it is going to take the whole of fine wine critical opinion by surprise, as well as ourselves. That said, as we noted in the last report, pensions HAVE to own equities even if the forecast is bleak, simply because the forecast might be wrong, and it is the same when investing in fine wine.
A coherent approach to developing a portfolio right now would be to overweight Tuscany, but as you do so remember that there is safety in diversification. The higher risk strategy would be to put all your money into Sassicaia 2013, but if you want to moderate that risk then the easy way to do it is to own a selection of the other wines mentioned above. Masseto 2015 would be a good accompaniment. For all the other producers the 2013 scores best on the algorithm. With Masseto while it also scores well, the 2015 does even better.
As we move toward the last week of the month it is, we feel, not too early to suggest that there is a somewhat warmer glow to the market than we have seen for a while. Offers seem to be being snapped up much more readily even when placed at what we might call ‘hopeful’ prices. Obviously sterling is a touch easier but we think there is more behind the current interest than that. Selling encouraged by sterling weakness has a different flavour to it, in this respect: when the pound weakens, it enables foreign sellers to release stock, but this doesn’t drive prices up. Rather it keeps them flat. Prices rise when buyers really want the wine, and are prepared to pay up to get it.
We have been in this quieter phase for some time now. The market has formed a solid base from which to embark on the next rally. Clearly we think the Tuscans will be in the forefront of this move, but if we are indeed in for a brighter 2020 it won’t be long before Bordeaux starts to rumble.
Philip Staveley is head of research at Amphora Portfolio Management. After a career in the City running emerging markets businesses for such investment banks as Merrill Lynch and Deutsche Bank he now heads up the fine wine investment research proposition with Amphora.