What do you do all day? The bull market has run for about nine years. You advise some clients who think it’s too late to get in. You try to talk other clients, looking for “the next big thing” out of fringe investments that scream risk. You need a drink at the end of the day. Oh, you happen to be a wine fan. How can you buy good quality wine cheaply, using the same advice you give your clients?
This is not an article about strategic concepts. It’s about how to go shopping in mid-October.
What Should I Do?
Start by understanding wine is a very inefficient market. It’s heavy, fragile, takes up space and is sensitive to temperature. Most is sold through the three tier system of producers, distributors and retailers. (1) Each new vintage means new wine is coming into the warehouse. They’ve got to do something with last year’s model.
1. Get a good advisor.
Just like the financial services business, it makes sense to work with an advisor who understands you. As an advisor, it’s knowing a client’s goals, objectives and temperament for risk. In wine, it’s know your taste and price point. Buying wine is still a transactional business. You are only paying for advice you choose to take.
Lesson: Find two or three good wine stores. Get to know the manager on a first name basis. Follow their advice.
2. 2015 Bordeaux.
It was a good year. There’s lots still on the shelves. 2016 was a good year too. Distributors need storage space. This means clearing out the 2015’s through closeouts to your local wine store. Wines under $ 15.00 are likely to be made with lots of Merlot. Try to find ones under $ 10/bl. They should provide good drinking for the next couple of years. FYI: If you see a set of initials followed by a few numbers, it’s probably a “zip code wine” bought from a cooperative or bottling plant in France. It should still be tasty.
Lesson: You buy well run companies in out of favor industries when the price is down. It’s still good wine. They just need the floor space.
3. 2017 Rose wines.
You know Rose is hot. Old habits die hard. Memorial Day to Labor Day has traditionally been the Rose season. When the temperature starts to dip, it’s back to red wine. The popularity of Rose has grown to the point its fine to drink year round. The distributors know demand falls off in the fall. Prices get slashed.
Lesson: Timing is everything. You’ve placed limit orders before. You “hit the bid” when prices plunge.
4. The big names do a pretty good job stabilizing prices.
Most bottles you see on store shelves are $ 40.00 – 50.00. Can you do better? Costco sells French champagne under its Kirkland label. It’s true champagne. Trader Joe’s usually carries a French champagne too. Both are priced at about $ 20.00.
Lesson: You can often find value by not chasing the popular stocks in a specific industry, but finding others in the same business. Your hope is that you’ve gotten there before the stock is on the big money manager’s radar.
5. “Buy when there’s blood in the streets.”
OK, Baron Rothschild was a bit extreme. (2) The list of wine producing countries includes Argentina, Spain and Portugal. Each has had problems with its economy over the years. In Argentina, they may be currency pressure too. Wineries that make their money from the export markets need to slash prices to move product. Look for good value Malbec from Argentina as well as a range of wines from Spain and Portugal.
Lesson: Contrarian investing usually means you are buying when others are selling.
6. It’s said to be the nation’s largest wine retailer. (3)
They don’t stock anywhere near as much as wine specialty stores, but their pricing is very, very competitive. If you are looking for brand name wines guests will recognize, this is a good place to start your comparison shopping. They are good wine buyers too. They often find quality wines you’ve not heard of, priced very attractively.
Lesson: You often outsource stock selection to professional money managers who are experts in their field. Here, you are letting an established retailer would a good reputation do the work.
You don’t need to chase prices. You don’t need to wait until the last moment to buy what you need. Approach wine buying with the same discipline you apply to the investment process.
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