Wine Investment Friday

This newsletter is designed to bridge the gap between trade and the investor. Each week we will help investors better understand the nuances of why some cases appreciate and some standstill. We will unpick the characteristics that construct financial potential to help your money work smarter. 


This week we are analysing a case of:

Haut Brion, 2009

Explaining what creates a great investment wine and how it interacts with the market. Ultimately showing you the role this case could play in your portfolio.  


Beneath the Label: 

The oldest continually working Chateau in the region. The chateaus ownership was at one time included as part of a dowry, constituting perhaps the worlds greatest gift. It is one of the original first growths and yet remains somewhat distinct, famed for its incredibly tertiary character. 

Critic Score: 100 Points – 100 points – Robert Parker
Described as still needing time, surprising given 09’s reputation for early accessibility. 

Region Rating: Pessac Leognan, 98E
Perfect growing conditions, with the plentiful sun creating a perfectly melded tannin structure.

Drinking Window: 2020-2054
The notes suggest this is likely to have later development than its peers. Positive for late trading momentum.   

Production Volume: 10,000 cases
A modest production, somewhat lower than the likes of Lafite or Mouton.

Summary:
The late development characteristics of the wine compared to its early drinking neighbours from the region could be a very interesting angle to pursue. This predicted late development provides confidence in the wines ability to maintain the 100 point scores. It also affirms predictions of late trading momentum. 

Underneath this, you are buying a fundamentally sound wine. The scores, the vintage, legal designation and so on are all top tier. This goes a long way to minimising long term downside risk. 


“It has gained in recent years and begins to flirt with perfection”

Martin 


Money Matters:

Brand Power: 92/100, rank 15th in JF Tobias Brand Power Metric
First growths have incredible global appeal benefitting significantly from their designation. However, an added nuance to Haut Brion is the distinctive squared bottle, its a small detail but a memorable one. 

Liquidity: 80%
A top tier first growth such as this, if priced correctly, has an extremely short exit timeline. The graph below shows the frequency of trading around the item throughout its lifetime. 

Inter-Trade Price Volatility: 5.37%
The data displays the lack of volatility in the asset and the gentle predictability. No nasty surprises coming from opaque data and pricing. 

Price History:

Summary:
This is a blue-chip stock in its performance. The market reacts around Haut Brion is very stable with a high level of insight available and great liquidity.

First growths are often used as barometers for market sentiment. The changes in liquidity are easily identifiable and so too are the price changes. Due to their relative price points, in a market downturn merchants will choose to discount more valuable liquid items first as they constitute smaller percentage changes and land with more subtlety in the market. Very useful to have in the portfolio for monitoring wider macro sentiment. 


Position for Profit: 

Bargain Moment. 

Buying first growths is like buying real estate. The initial outlay is significant because it represents quite a chunk.  However, if you have done your research, you know that the asset fits all your criteria for quality. Therefore if you buy correctly you know there will always be a buyer out there. Much like buying a house the majority of the time your exit date is a long way in the future and this mindset should be transposed onto your first growths. 

With that in mind, the current depressing wine prices should represent a buy signal for this long term asset. In the last 6 months, this case has lost 6.76% of its value. In 5+ years time, when you come to sell this item this momentary depression in price, will make a nice cherry on top of your returns. 

The Author

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Jake Leighton