Philip Staveley
The views expressed in db Reader do not represent the views of the drinks business.

Super Seconds: up, up and away!

Our post referendum trawl of value and performance in the fine market this week brings us to the Super Seconds. It is worth pointing out by the way that the rally shows no sign of abating, and although movements of this nature are by no means unprecedented, current conditions represent the most concerted uptick since the beginning of 2013. At that time the Liv-ex 50 moved up about 8%. The current rally is 13% and counting.

superman super secondsIt is also taking place over twice the time frame, has come after a much lengthier consolidation, and has the added stimulus of Sterling depreciation which, even if it turns out to be a one-off event, has awoken investors to the opportunity in the market.

At Amphora we are at pains to stress that while Bordeaux can be said to lead market sentiment in general terms, it is NOT the be-all and end-all.

The declines in the Bordeaux sector could have been hugely mitigated by exposure to wines from elsewhere, and even though the Liv-ex 1000 index is 55% Bordeaux the degree of outperformance from its other constituent parts has had a highly beneficial influence.

Meanwhile the Bordeaux 500 index comprises 20 Super Second wines which not only had a moderating impact during the downturn, but which are also taking a full part in the current uptick.

So which Super Seconds are leading the charge, and where are the best opportunities for future profit? Firstly, it is worth noting that 48 wines from our selection* are up 10% or more, since 22 June.

Smith Haut Lafitte has four out of the top 10 risers. There isn’t a Cos d’Estournel in the top 20 risers, and the best performing Montrose is 25th, the 2010, which is up 11.61%.

There is often a tendency to think that the best risers will be amongst the cheapest, in absolute terms, yet Palmer 1999 is fifth best performer overall, rising 30.86%, despite being lower in price than only the on vintage Mission Haut Brions and the Palmers from 2000 and 2010.

That said, there is only one Mission Haut Brion up over 10%, and that is the still unbottled 2014 (+10.92%).

Drilling down we find several anomalies, as we might expect, even though the overall pricing retains a coherence that might confound many who do not understand the market place.

Amongst the Smith Haut Lafittes the best performer is the 91 point 2003 which is up 38.55%, but the best bargain is the 98+ point 2010 at £890**. The 100 point 2009 is out on its own at £1,730, but the 2000 and the 2005 (95 and 98 points respectively), are £1,050. There should be a comfortable 10% upside near term in the 2010.

The aforementioned Palmer 1999 scores 95 pts and now trades at £2,400 after its recent rise, whilst the 92 point 2006 is up 22.77% to £1,650. The 1997 and 2003 are also up over 10% so this producer is taking full part in the current action. Based on this, and the fact that the 96 point 2010 is up 11.11% at £2,500, we would highlight the 97 point 2005 and 2009 both of which currently cost around £2,200.

In the much discussed 2003 vintage (on or off?) Léoville Poyferré produced a perfectly respectable wine which scores 97 pts, and it is up 13.33% to £1,020. When the 93 point 1996 trades at £995, the value is all in the 98+ 2010 at £920.

Wines made by Duhart Milon had a great run up to 2011, partly because the its relationship with Lafite Rothschild. Unfortunately that has to a great extent unwound in recent years, with vintages like 2009 and 2010 down from the £1,200 mark at their peak. The 90 point 2000 is up 14% recently at £1,000 though, and with the 89 point 2002 and the 93 point 2003 trading alongside the 2009 and 2010 at just above £600 it may be time to revisit the 2009 and 2010.

We have noted in the past the extent to which performance in the 2009 and 2010 vintages had been compromised over the years by the degree to which they were both too highly priced en primeur, and then ramped up by speculators who spent painful days post-crash offloading into an unreceptive market.

At Amphora we think it is time to revisit these two spectacular, yet different vintages. In certain cases the move is already under way. Léoville Barton and Poyferré 2010 are up 12.67% and 10.31% in recent weeks, and Montrose and Palmer 2010 are both up over 11%, while Ducru Beaucaillou is up 13.49%, so the march is on!

The Ducru Beaucaillou 2009 is a perfect 100 and is the chateau’s best performer post referendum, up 13.45% at £2,100. The 2010 is no slouch at 98+ but trades down at £1,500, cheap even by the standards of the 1996 (96 points), the 2000 (95) and the 2005 (97)

Similarly over at Léoville Las Cases the 98+ point 2009 is up only 1% so far at £1,800, whereas the 98 point 1996 and 2000 trade at £2,100 and £2,150 respectively.

We pointed out last week that when the market is moving such as it is right now, there are bargains to be had. Under normal circumstances Amphora subscribes to the view that fine wine investment is a longer term play. That is still very much the case, but we are currently in a period when a nimbler approach will undoubtedly reap dividends.

 

* For this purpose our selection comprises all the Super-Second components of the Bordeaux 500 index bar Grand Puy Lacoste, Haut Bailly, Paper Clement, and Gruaud Larose, but we have included the past 20 vintages, whereas the index includes the past 10 physical vintages.

** All prices quoted are Liv-ex “market prices”.

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