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The Eagle has Landed: Californian fine wines and their place in your portfolio

21st March 2016


As the 2009 vintage is announced as one of the top 10 lots to feature at Sotheby’s upcoming spring Hong Kong sale, and due to the recent release of the 2013, Screaming Eagle has been in the press a lot lately.

But does this highly-priced trophy wine have any place in a diversified portfolio? This week we examine the relative risk of cult wines and suggest ways to implement them safely and wisely into a balanced portfolio of investment-grade wines.

 

Collectible wine: what makes Screaming Eagle fly?

Jean Philips, the original owner of the Screaming Eagle winery, clearly knew her stuff. A former real estate manager, she began acquiring land in 1986 one parcel at a time, and in the beginning dedicated herself mainly to growing the glorious grape and selling to local Napa wineries. Due to her diligent picking of prime growing terroir, the grapes produced were so special that she was persuaded to start making her own wine.

The first Screaming Eagle vintage was released in 1995, bottled by Philips’ own hand in 1992. The wine was a roaring success, and prices skyrocketed in the first few years of trading. Coupled with low production rates – typically 500-750 cases a year – it has quickly become one of California’s top trophy wines.

 

Cult wines: a high-yield investment?

By catching the right vintage at the right time, much money can be made from delving into these trendy new investment wines.

Those who purchased the 100-point-scoring 2010 vintage must be rubbing their hands together with glee. The equally perfect 2012 is going for 20% cheaper, which can only be a pricing anomaly – investors should ideally be looking to swap their 2010s for 2012s, especially considering the relatively higher price of the newly-released, lower-scoring 2013.

But all this beggars the question: why are these wines so unreliably priced? The answer is one of three factors: impending scarcity, highly-effective marketing or the achievement of “cult” status.

Considering this uncertainty in the market for trophy wines coupled with their high price, should investors be cautious of including them in their prized portfolios?

 

How to invest in trophy fine wines

In short, the idea is to have no more than 20% of your portfolio occupied by these cult wines. From a balanced investment perspective, one 3×75 case of Screaming Eagle 2009 among 25 other cases of wines from around the world is a much safer bet than one single case of DRC 2001.

Part of the fun of being involved in the fine wine market, as with any investment, is to occasionally take risks whilst not pushing the boat out too far. These exciting wines provide the investor with the opportunity to do just that, provided they are balanced with the inclusion of other, more stable investment commodities.

 

The 2009 vintage wine: “insanely beautiful”

In preparation for Sotheby’s HK sale, here are Robert Parker’s tasting notes for the 2009 vintage:

“Screaming Eagle is insanely beautiful. It is a relatively open vintage that nevertheless possesses stunning intensity, depth and elegance. Dark red berries, flowers, mint and spices are all woven together beautifully. Layers of fruit build effortlessly to the long, seductive finish. The 2009 continues to flesh out in the glass. All of the elements are in the right place in the drop-dead gorgeous, stunning 2009. A haunting bouquet reminiscent of a great Musigny lingers on the finish. Screaming Eagle is one of those very rare properties where the bottled wine captures the fullest essence of the fruit just as it tastes at harvest, and that is very, very rare. Anticipated maturity: 2017-2029.” (98 points, December 2011)

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