WINE INVESTMENT – Hard, Expensive, Unreliable – BUT – SO much FUN

By Lynton Barber – Sterling Wine Auctions

LB View – Bias? YES – My confession – Wine Investment – Dangerous stuff – Yes you can buy and sell wine to make money – Investing in racehorses or classic cars is also a thing – I have been looking at this subject for many years. Not just as a casual observer – My previous life – last century,  was in the big end of the investment management game.

Simple summary – most wine sells at auction for a profit.  What does that mean? Take away the cost of storage (off site fees or power bills) then factor in damaged and “lost” bottles.  A simple rule of thumb is “capital stability” can be reasonably expected – As in, you don’t make or lose any money

There are some MASSIVE variables to be factored in – Selling slowly and maximising the return V a quick run through with fast turnover can see the total return vary by 50% – WORSE – Your wonderful vintage bottle might have a dodgy cork that fails – A half empty bottle isn’t a bottle of wine at all,   it is worth NOTHING – same with label damage – Wet cellars or hungry cockroaches with a label lust can reduce the value of your special bottle by 50% – yep – buyers won’t pay big bucks for an ugly looking bottle – In fact, most buyers just don’t want an ugly bottle at any price (Drinkers note!! Search for severe label damage if you want bargains)

Ok – Now we have got all the legals out of the way – Wine investment is hard, expensive and unreliable – but so much FUN

Golden rule – don’t do this just for money – buy wine that makes you happy – Like buying art – Yes a shark decomposing in a glass case is worth a fortune – Damien Hirst made headlines in 1992 and it started a wave of decomposing meat art – all so complicated, and smelly

Ok – buy wine that you like and store it properly – make sure the bottles are perfectly original NO damage or ullage – as noted earlier, the difference in value is HUGE

Wine Investment is a serious subject with serious analysts working on indexes and commoditising your drinking pleasure – I want to throw a few simple ideas out there and keep it simple

Got to be perfect – if the bottle needs notes, there goes your profit – Buy perfect – keep them perfect

Got to be Grange – Not really, but Penfolds Grange vintages up to about 1998, have all done well

Henschke Hill of Grace also performs well

Go for the BEST vintages The following outstanding vintages of Penfolds Grange will always be in demand 1971 1976 1982 1983 1986 1990 1991 1994 1996 1998 2004 2006 2008 2010 2013 2015

Bank on Birthdays – for the past ten years Sterling has seen Penfolds Grange big Birthday vintages (particularly 40th 50th 60th birthdays) spike by up to 50% – gotta be perfect if you want the big bucks – we are already seeing the “+1 set” jumping in price (1961 1971 1981 1991) A good looking 1981 Grange in the second of October Sterling sale pushed bids up to $910

Keep an eye out for the +1 series Granges – Already a bit late – Look further out for  +2 – +3 – +4 They will all roll around soon enough

Henschke Hill of Grace is a recent vintage alternative – 80’s 70’s 60’s Hill of Grace are VERY rare and often in poor condition

Rockford Bucks Press – The good old Basket Press is a gold mine that never stops delivering. This is one of those “in the know” stories – Every release of Rockford Basket Press can be sold for double the mailing list price, Rush out and buy some? – SORRY – CANT – All sales ARE ALREADY allocated and sold out to the mailing list – You can’t get onto the mailing list

Some areas are hard work – Burgundy is the preserve of the fussy, biased expert – Very tough to buy and sell in this space – DRC is the crowning example – Domaine Romanee Conti wines – all wines – are fabulously valuable – and the buyers are notoriously fussy and suspicious – Every right to be, DRC is No1 target for tricksters – Sterling will not list DRC unless the vendor can provide complete documentation – purchase and storage history

Bordeaux is also hard work – So much energy goes into vintage assessment and setting release prices – so much money goes into pre- purchase allocation arrangements – out the other end there are so many forces influencing price – we have seen many vintages perform badly as “investments” the hyped up arrival prices sliding below the market demand prices – Often, even years after release

Back to the Golden rule – do it because you like it – What do you do with a dead shark in a tank?  Penfolds Grange 1951 is apparently worth $100K  – not bad for a bottle that most consider undrinkable – Not bad for a bottle that 20 years ago was selling for under $30K – The dead shark in a tank comparison is reasonable –  your 1951 Grange might leak – might get damaged and how many buyers are out there in the $100K bottle market?

Buy what makes you happy – the 1962 Penfolds Bin 60a is widely considered as one of the world’s greatest wines – Today a good example is worth around $20K – Ten years ago $10K?  Just goes to show that worlds great wines are worth less than a hyped up collectable – take that as you will – one things for sure – the Bin 60a is, and will continue to be a better drinking wine!

A few more warnings – beware the spike – Best wine in the world award winners and JWT recipients are all spikers – Prices jump – Supply falls short – and then everyone forgets and moves on to the next shiny toy / distraction – then prices slump back to where they should have been or below

Yes you can break the Golden Goose – sometimes the goose just gets tired or boring – The ultimate “long haul” wine investment is the glorious Chateau d’Yquem.  Recent vintage 100pointers like the 2015, 2009 and 2001 will have just settled into their puppy fat when I shuffle off the mortal coil (in no hurry mind you) eg Parker sees the 2001 drinking up to 2100

Right now Saturnes, even the best, are out of fashion and are VERY hard to sell – Maybe a good time to buy – if wrong – we will all be dead before the mistake becomes a problem

Same goes for Port – the good, real stuff from the Douro Valley and the Oz fortified imitation are almost impossible to sell – again maybe a good time to buy and hold?

Breaking the Golden Goose? Yep been done – Wines of mythical standing and iconic history like the Wynns Coonawarra “black label” Cabernet Sauvignon have been brought to their knees by corporate “genius”

Just as depressing, corporate genius mixed with greed? We saw the Herculean Penfolds Bin 707 go from the rooster on the world stage to a feather duster – radical price hikes can do that

Like managing any well balanced portfolio – too many eggs in the one basket will end up in tears – spread it around – Then the most important consideration -many a good fellow has told his better half, All that money in wine is an investment –  THE BEST excuse!!!

Well, it is all an investment in drinking pleasure – bringing a few themes together – drink less and drink better – invest in the best

Buy 1996, 2002, 2008 Prestige Cuvee champagne – 2016 Barolo – 100pt 2001 2009 2016 d’Yquem – Oz super premiums from 2010 particularly freaks like the 2010 Penfolds St Henri – Freaks? 1982 Wynns John Riddoch – 1995 Houghton Show Reserve Frankland Shiraz – Everyday freaks like every vintage of Giaconda Chardonnay

As investment portfolio manager you have the responsibility – duty – to section the collection for regular quality control tastings – tricky inconclusive business that often needs follow up re-testing 😊

Easy and obvious – all about good things in good condition – Birth years are a real and boring way to make money

One more reality check – sets DO not have a premium value – just because you have a collection of every vintage doesn’t make it more valuable – better to buy the best vintages and not buy the lesser ones – unopened boxes are good for protecting the wine bottles – not much else – No – the unopened box does not add value –

Personal faves – a tip I am happy to pass on – My Opinion – Moss Wood Estate Wilyabrup Cabernet Sauvignon is undervalued – Dukes wines and Castle Rock wines are so under-priced they do in the heads of our conspiracy theorists – Tahbilk 1927 Vines Marsanne is a good one to hold – Dark horse?  Gotta have at least one Specky in the portfolio – Look at Hahndorf Hill GRU – Gruner Veltliner – great drink that sells for way short of what it costs to make – Who Knows – BTS or Justin Bieber might fall in love with the stuff and make it an international MUST HAVE – Enjoy