Fine wine investment: A change in fortunes?

Okay I’ll fess up at the outset: I own a Cheval Blanc 1998, so it is with elevated interest that I noticed Lisa Perrotti-Brown MW’s recent retrospective of that vintage. My interest is not just personal, of course, because its consequences, if any, will help develop the narrative about the Parker succession.

It is generally accepted that although Perrotti-Brown represents The Wine Advocate her opinions carry less weight than either Parker himself, obviously, but also Neal Martin. Even within her Asian domicile (she operates out of Singapore) it is considered that she is overshadowed by the more voluble and demonstrative James Suckling (based in Hong Kong).

The essence of her retrospective is that 1998 in certain appellations is superior to popular belief, and she has substantiated that by elevating her scores for wines from Graves, Pomerol, and particularly St Emilion. We have long known that these areas enjoyed themselves in 1998, indeed the overall vintage scores are 94, 96 and 96 respectively, all very much ‘on-vintage’ scores.

The difficulty the market has is that 1998 is typical of a mixed vintage, in so far as it is nowhere near so good over the more northerly parts of the Left Bank. Margaux only merits an overall vintage score of 86, and Pauillac an 87; hardly the stuff of legend. As a result 1998 lacks the cachet of a 2005, 2009 or 2010. Your highly knowledgeable wine buff might want more granularity but for a lot of consumers it is sufficient to know that such and such a Bordeaux was a 2010. Quality is assumed, conferred by the vintage.

This, we believe, plays to the patient investor’s advantage, because mixed vintages don’t tend to become so extravagantly over-priced. Bargains are available, although you often have to wait for the effect of old age to moderate the requirement for a particular vintage to be good across the board before prices will rise to premium levels.

Compare and contrast 1989 and 1990. Graves in 1989 merited a mere 89, making all the more creditable the 100 point scores of Haut-Brion and La Mission Haut-Brion. We mentioned in the last note that there had been an increase in activity among older wines, and the former featured prominently in this, but the point is that there is now almost a consensus that 1989 and 1990 were both great years.

That is patently true of 1990, whose aggregate scores across the five main appellations is 472, but on that admittedly very crude basis 1998 edges 1989 by 459 to 449 and 1989 was actually a moderate year punctuated by some spectacular wines, not just in Graves. The Montrose was upgraded last year by Neal Martin from 96+ to 100, for example. There is no doubt that high scores do help elevate the assessment of a vintage overall, and have a beneficial effect on prices in consequence.

Over time, the same impact may be felt by the 1998s, which brings us back to the Perrotti-Brown retrospective. Haut-Brion in Pessac Léognan (Graves) was upgraded from 96 to 99 points, Trotanoy in Pomerol from 96 to 99, Angelus in St Emilion from 96 to 98, and Cheval Blanc trumped them all moving from 96 to 100. That is a lot of very good scores although clearly Margaux and points north on the Left Bank are not quite so well-favoured at this juncture.

So will the market sit up and take notice? Will Perrotti-Brown’s influence increase? We will be monitoring the situation closely especially as far as the price of Cheval Blanc is concerned! In the meantime there is an active trade available to Montrose aficionados, especially those who think Neal Martin is the future voice of critical appraisal.

Montrose 1989 might have outperformed the 1990 over recent years, but it still trades at a considerable discount. Certainly some discount for inferior overall vintage is appropriate, but note the prices in the accompanying chart:

At Amphora we believe the outperformance of the 1989 is more the market realising just how cheap it was than thinking the 1990 was too expensive. In absolute terms the 1990 has done just fine, keeping up with the Liv-ex 100 over all time frames up to the last six months:

The 1989 having had its great run has consolidated for the last year, has been upgraded to 100 points, is trading at a 28% discount to its sister wine from 1990, and we know that recently there has been a increasing interest in a lot of the older wines. We believe investors could do worse than pick up Montrose 1989 in anticipation of a renewal of the rally.

Now that Vinexpo HK has concluded we hope to see more 2017 en primeur releases. Lafite have announced a price for Carruades which we understand will see it available at £1,650 per case of 12. If you get the chance to participate in this offer we recommend you grab it with both hands. There is at least 20% upside in our view from now to physical availability.

Over the coming weeks we’ll keep readers advised about how good or otherwise the pricing for this campaign is. There are likely to be bargains but we recommend a highly selective approach.

 

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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