15 November 2011
The news that Warren Buffet, the worlds richest man and owner of Berkshire Hathaway Inc. has bought more than $10 Billion of shares in IBM raising his stake to 5.5%, provides an interesting insight into his strategies in these uncertain times.
For many it all looks doom and gloom, with the debt crisis in Europe, but it also provides windows of possibilities.
Recessions are known to be where the Rich get richer and the Poor get poorer, but this is not down to luck, it is down to shrewd investors looking for opportunities and speculating.
The wine market is no different from the share market and there will always be winners and losers. Warren Buffet has bought in to IBM to shore up any losses in other investments he has made, otherwise known as balancing the books. This is exactly what investors in wine should be looking to do, as already seen, some wines have dropped 20% or more in the last 4 months, but others have held their price and a wise investor should look for undervalued wines to balance their portfolio.
Liv-ex, the wine exchange, has seen an 8% drop in the last few months, but only in the last week has seen prices flatten out and greater interest return to the market. Is this the time to buy back in, may be to shore up losses, by buying good back vintages that are now looking undervalued.
Is it time to buy heavily, it is hard to say. Just before the wine prices started to decline, we made a call in December 2010 for all our clients to sell Lafite Rothschild 2008 at £14,500, most did. The wine is now trading around £9,000.
There is a lot of tension in the trade as we all wait on tender hooks to start buying again and it will not be long until the buying trend starts. It may only last for a few months but this could be what investors are looking for to re-gain confidence in this popular market.