A short note on our investment strategy for the coming year. Looking at the fallout from 2020, this year’s potential economic drivers and the key attributes you should be targeting when adding to your portfolio.
2020, What a Year for Wine
Finding the Bottom:
2020 saw the wine market undergo one of the largest contractions in its history. Initially sparked by the Hong Kong riots, exacerbated by the US-China trade war, with COVID as a final flourish. The subsequent decline across all areas of the market has been continuous and significant. A steadily accelerating race to the bottom began amongst merchants looking to reduce exposure and private clients rapidly liquidating for capital needs. By the end of the summer prices had been curtailed down to a point of true value, an area of solid support, the bottom.
It should be commented upon, that the above graph demonstrates the tail end of one of wines worst ever contractions. That is our market in free fall! Wonderfully demonstrating the defensive nature of wine and its stability under immense pressure.
A Necessary Evil:
While unwelcome to many, we believe this correction to have been a well overdue retracement. Too many wines were priced far beyond the quality within the bottle, many holding artificially bloated prices. For some a result of excessive speculation, others effected by greedy release prices, while most retained hallmarks from the 2016 FX spike. Reasons aside, the return of prices from a position of over inflation has had the effect of resetting the market. Thanks to the violent, fire sale behaviour from many, we now know where the true bottom is for all tiers of stock.
From the Bottom, the Only Way is Up
The Accumulation Phase:
There is often a tendency for many to disconnect wine investment from basic economics. Perhaps it is the nature of the good, or even a theme connected to all passion assets. However, as a traded and speculated upon asset, wine is driven by many of the same forces, albeit a little slower.
This image should demonstrate clearly where the wine market is at present. After a significant sell-off, where the market bottom has recently been found, we are now at a low ebb, a position of being oversold. Entry prices for the next leg up will never be better than right now.
Forced Higher by Policy:
The past year has seen governments create debt on a magnificent scale. With it set to continue deep into this year, the financial fallout from COVID is set to be far greater than any of the recent modern crashes. With the very real threat of negative interests and an extended period of inflation, finding a suitable place to store money safely and effectively will be of paramount importance. Policy in the years to come will undoubtedly be severe and placing your money to work, regardless of the sum, is something to prepare for. Why not move early with the smart money?
With Wine We Defend:
As a physical asset traded around the globe, wine holds a relative immunity to both inflation and detrimental fluctuations in FX rates. Now further consolidated by a level of price accuracy and transparency inline with traditional instruments, it is an investment to be trusted to store capital in through these times of economic stress.
How to Buy the Best of the Bottom
The Tide Will Not Raise All Ships:
We have identified that a market bottom was found, however this was from a point of over inflation. Not all wines will recover and grow in value, for many they are now at a true value reflective of their quality. So without a broad uptick in economic sentiment, the likes of which appear almost an impossibility at present, we need to pick our cases very carefully. Choosing only those that hold the strongest fundamental qualities, with the calibre to warrant positive speculation and early trading. The rest will likely cavitate at this low ebb, buying them would see capital tied into a stagnant asset.
Concentrate on Correlation and Quality:
Wine as a Passion Asset is already highly uncorrelated to central financial markets, however within the array of regions and producers lies the ability to extend that further. This is done by identifying the end consumer and considering their relationship with the economic environment. Simply put, the ultra-rich are still going to consume the very best wine in the world, undeterred by the economic environment, even if the rest of the world are winding back their luxury expenses. By buying wines of truly exceptional quality that appeal to this tier of buyer, you are insuring an enduring demand and eventual exit.
Fundamentally Exceptional:
Our formula can be simplified into a number of core steps. Identify the high watermark vintages, those that will forever be remembered and lauded. Pick wines with market-leading critic scores, both against those in the region that year and their own estate back catalogues. Then finally, and most crucially, purchase the wines at the lowest UK market price, or even better, below. A case of fundamentally exceptional wine will make for a safe, enduring and potentially extremely lucrative store for capital.
Track Record of Success:
Our Approach has seen over 90% of all our investment accounts opened in 2020 remain in and most gain profit. We have a fantastic track record of success, compounded further by our guarantee to provide your exit. Doing so ensures a total alignment of our incentives. This confidence is generated by our trust in our prudent stock-picking methodology coupled with unrivalled entry prices.
Time To Act
The right time to be getting in is now. If you would like to talk to someone that can help you protect your financial future, please click below to speak to one of our investment team. Aside from positioning your money safely for the coming years, our investment offering ensures you pay beneath the UK market price and will give you free access to our investment tracking tool. We look forward to hearing from you.
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