Fine wine investment: Searching among the 2014s

At Amphora Portfolio Management we obviously spend a lot of time scouring the fine wine market for bargains, and occasionally we will take a blanket view across all regions to see if there is anything notable from this top-down perspective.

We have talked of late about the value resident in pretty much every 2009 and 2010 ‘second wine’, but taking a step back we find that elsewhere in Bordeaux, among both Right and Left Bank wines, 2014 has started to feature prominently.

Aside from Italy, 2014 was a decent vintage across the board globally, earning a juicy 94 in Pomerol and over 90 in all Bordeaux appellations. Superior, in the round, to 2011, 2012, and 2013, while not as good as 2009, 2010, and 2015. A rich man’s 2008, if you will.

Delving into the first growths in this vintage we find bargains galore, everywhere bar Latour, in fact, which obviously hasn’t been released yet. Margaux is an interesting place to start, because last week we highlighted how important the regional vintage score is in considerations of relative value.

There isn’t much to choose between the prices of Margaux wines from 2011 through to 2014, which are, respectively £3,500, £3,550, £3,470 and £3,500 (per 12), yet there is a world of difference between the overall vintage scores (87, 89, 80, 90) and a reasonable spread regarding the individual wine scores (93, 96, 91, 95, respectively).

On the face of it you might think that in respect of the 2012 and 2014, the single point differential either way in vintage and wine scores might mean that you should pay just about the same for these wines, but investment success is all about marginal gains, and the balance of variables which comprise the algorithmic calculations sufficiently support the 2014 over the 2012 so as to make the points per pound spent 7.35 against 6.73, where the larger points per pound figure represents superior relative value.

According to the algorithm, therefore, Château Margaux 2014 is a 10% better buy right now than the 2012.

Mouton Rothschild gives us the chance to compare a top vintage against a secondary vintage, and helps illustrate the real benefit of the algorithm at work. Mouton 2009 is a top buy if you are looking for an on-vintage first growth. Vintage score of 99, individual wine score of 97, costing £5,600. So how does this compare with an off-vintage (albeit decent one) such as 2014 costing £3,500?

The 2014 scores 95 points and the Pauillac overall vintage score is 93, so you would expect the 2014 to be cheaper in absolute terms, but is the £2,100 discount good, bad, or indifferent in relative value terms? It transpires that the points per pound are very close in this instance, the 2014 edging the day by 7.95 to 7.84. To add context, the egregiously expensive 2000 merits a lowly 2.07 points per pound.

This is actually very helpful when you are constructing a balanced portfolio, which would contain wines from different years, and preferably expressions of both off and on-vintages. Under these circumstances the two Moutons around which you might build the first growth exposure of a diversified portfolio would be the 2009 and the 2014.

Moving into ‘super second’ territory we find La Mission Haut-Brion, which is priced almost like a first growth in on-vintage years, but very much like a super second in off. We are on the record as saying that “Mission” 2008 is among the best buys in the market at present, and the 2014 is not far behind. 0.03 points per pound behind, to be precise, which as close as makes no difference. Both are worth buying.

We don’t often recommend Lynch Bages for investment purposes because few of their wines stand out as bargains, the prices all tending to gravitate into a similar space. It is also quite difficult to find a wine scoring in the 80s in off-vintage years which costs enough to offset the storage charges, as can be the case with super seconds. We tend to prefer wines costing over £1,000 for that reason, so when buying something for less there has to be a very good reason.

We note that the older off-vintage Lynch Bages (pre 2005) trade above £1,000, while younger vintages cost slightly less, despite the fact that both vintage and individual wine scores are superior. The older the wine, the greater the scarcity, the higher the price, is the logic. All things being equal, therefore, the 2008 Lynch Bages (wine score 93/vintage score 91) ought to cost much the same as the 2014 (wine score 92/vintage score 93), perhaps with a 5% allowance for age.

What we find in algorithmic terms, however, is that the 2008 scores 6.62 points per pound, while the 2014, which only costs £740, scores a whopping 9.10. It seems to us that this is one of those examples whereby we should indeed buy a wine for only £740, because it has to appreciate over 20% just to bring it into line with the rest of the stable.

On the Right Bank there are fewer notable anomalies, although we find that the 2014 wines from Angélus, Pavie and Cheval Blanc all stack up very well, yet in Pomerol there are plenty of bargains but none from 2014. It is possible that Pomerol producers priced in the quality of the vintage better in general terms than elsewhere. A rising tide, they say, floats all boats. There are still a handful of 2014s below the surface, and we recommend picking them up before the broader market becomes aware of them.

 

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.

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