Reasons to be cheerful?

2015-10-29

Quite a lot of members we speak to these days assume that the market prices of Bordeaux are still stagnating or falling. The morosité that had descended on the region's finest wines in by 2012 does not appear to have lifted.

Wine traders will point to volumes that are much reduced since the giddy heyday of 2009-2011, and that is of course true.

However, it does not mean that in aggregate, prices of Bordeaux have begun an upward trend. In the last year, the Wine Owners Medoc Classed Growth Index is up 8.2%.

Whereas the Wine Owners First Growth Index has only managed half of that in the last year, up 4.1%.

That's still better than the performance of the FTSE100, which is fractionally underwater over the last year, and exactly where the S&P500 has clawed it's way back to after the summer's wobbles.

Wine Owners 150 = Turquoise

FTSE100 = Navy

S&P500 - Green

However, when looking at First Growth performance over the last 12 months, it is far from broad-based. 'The further they rise, the longer they fall' seems to hold true, with Lafite 1986 and 1989 performing the worst at -8% and -9% respectively.

Chateau Haut-Brion Pessac-Leognan Premier Cru Classe AOP	1999	-5.45%	£ 216.68
Chateau Latour Pauillac Premier Cru Classe AOP	2006	-5.75%	£ 286.67
Chateau Haut-Brion Pessac-Leognan Premier Cru Classe AOP	2009	-5.82%	£ 441.67
Chateau Haut-Brion Pessac-Leognan Premier Cru Classe AOP	1982	-5.92%	£ 436.68
Chateau Lafite Rothschild Pauillac Premier Cru Classe AOP	1982	-6.29%	£ 1,810.14
Chateau Latour Pauillac Premier Cru Classe AOP	1998	-7.15%	£ 270.83
Chateau Haut-Brion Pessac-Leognan Premier Cru Classe AOP	2006	-7.26%	£ 212.50
Chateau Margaux Premier Cru Classe AOP	1989	-7.59%	£ 250.10
Chateau Lafite Rothschild Pauillac Premier Cru Classe AOP	1986	-8.13%	£ 651.48
Chateau Lafite Rothschild Pauillac Premier Cru Classe AOP	1989	-9.11%	£ 395.92

Among the vintages populating negative territory, 1986 has suffered with the exception of the very great Mouton. The exceptional 1989s and 1990s have fallen, along with with the dull 1999s.

The risers are headed by Mouton, Haut Brion and Latour. The top 10 performers registering double digit growth are entirely accounted for by these three Châteaux.

Wine	Vintage	Change 1 year	Price
Chateau Mouton Rothschild Pauillac Premier Cru Classe AOP	2005	22.39%	£ 366.67
Chateau Mouton Rothschild Pauillac Premier Cru Classe AOP	2008	21.13%	£ 262.54
Chateau Haut-Brion Pessac-Leognan Premier Cru Classe AOP	2005	20.95%	£ 437.50
Chateau Mouton Rothschild Pauillac Premier Cru Classe AOP	1996	16.87%	£ 282.74
Chateau Latour Pauillac Premier Cru Classe AOP	1990	14.30%	£ 429.12
Chateau Latour Pauillac Premier Cru Classe AOP	2005	13.36%	£ 566.79
Chateau Mouton Rothschild Pauillac Premier Cru Classe AOP	2000	13.32%	£ 1,038.81
Chateau Haut-Brion Pessac-Leognan Premier Cru Classe AOP	2008	11.00%	£ 226.64
Chateau Haut-Brion Pessac-Leognan Premier Cru Classe AOP	1989	9.08%	£ 1,000.03
Chateau Latour Pauillac Premier Cru Classe AOP	1995	8.49%	£ 316.67

Crossing over to the right bank, predominant top performers over the last 12 months are St EmillMedoc Classed Growth Indexon 2005s and the 2001 Class A relative newcomers. Since March 2015 The Wine Owners Libournais Index is up 7%, coming off it's 3 year lows at that point.

Chateau Angelus Saint Emilion Premier Grand Cru Classe A AOP	2005	53.85%	£ 300.00
Chateau Angelus Saint Emilion Premier Grand Cru Classe A AOP	2001	48.07%	£ 176.57
Chateau Pavie Saint Emilion Premier Grand Cru Classe A AOP	2001	45.67%	£ 183.46
Chateau Angelus Saint Emilion Premier Grand Cru Classe A AOP	2000	37.16%	£ 301.79
Chateau Pavie Saint Emilion Premier Grand Cru Classe A AOP	1998	34.59%	£ 161.84
Chateau Larcis Ducasse Saint Emilion Premier Grand Cru Classe B AOP	2005	27.82%	£ 110.96
Chateau Pavie Saint Emilion Premier Grand Cru Classe A AOP	2005	26.84%	£ 232.57
Chateau La Violette Pomerol AOP	2009	26.67%	£ 208.33
Chateau Cheval Blanc Saint-Emilion Premier Grand Cru Classe A AOP	2005	24.71%	£ 433.34

What can we conclude from this? Some commentators are suggesting that value is returning to older back vintages on the back of 4 year declines. Relative value vs quality is likely to be a key driver of future value, for which we recommend you check out the new price per points builder on Wine Owners to which you'll need to subscribe.

Liv-ex have recently seen a predominance of trades of the 2010 vintage, and whilst there seems to be value returning selectively to the Classed Growths, one wonders if it's a little early yet the First Growths, whose starting release prices were in nose-bleed territory. Since 'the further they rise, the longer they fall' it may yet be a bit early to call.