Investing in luxury watches

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The term “alternative investments” is something of an oxymoron. Investment tends to imply expectations of growth founded on a base of solidity; while “alternative” suggests turning away from this concept and forging another path.

For the present purposes the term alternative investments would seem to apply to “assets”, in their broadest sense, which afford a measure of intrinsic enjoyment other than the pecuniary satisfaction of increasing in value. And taking this as a definition, alternative investments are far safer than conventional ones.

Take watches, for example: I have a relative who has an early 1960s Breitling Navitimer which he purchased for about £50; the watch is still going strong and he could probably sell it for about £2,000 ($4,000), but instead of realising the capital growth of his investment he prefers the daily dividend it pays him in the enjoyment of wearing it.

It is an old truism when dealing with this sort of investment that you should buy the best you can afford and buy only what you like. To establish this you must first get your eye in and understand just exactly what it is that appeals to you in a watch.

Is it the romance of a particular brand? Does the pulse quicken at the name of legendary models of Rolex: the Daytona, the Submariner, the Explorer, the Milgauss or the GMT Master?

Or is it what is under the dial and inside the case that excites? Rare feats of micro-mechanical engineering, boasting hundreds of microscopic parts arranged in a complex three-dimensional jigsaw puzzle to fit inside a space a mere 3cm or 4cm across and a few millimetres high.

Or is it just a case (excuse the pun) of being attracted by style and design – by the use of precious stones on a dial, or the exotic and decidedly ungeometric Dalí-like profile of Cartier’s Crash watch?

The luxury watch industry has been enjoying a sustained boom and the market has changed radically. For many years collectible watches were pocket watches, a quasi-academic field, and it remains true that exceptional pocket watches – one-off pieces from makers such as Breguet, Patek Philippe, Audemars Piguet, Girard Perregaux, A Lange & Soehne and Vacheron Constantin – command high prices.

However, it is with wristwatches that the greatest action has been seen in the past 25 years. An interesting example of just how much prices have changed between the early 1980s and the early 21st century is a rose gold Patek Philippe world time, ref 2523 from 1953. In 1984 it sold at Sotheby’s Geneva for SFr20,900; in 2001 at Sotheby’s in New York the same watch sold for just over $1m (comfortably in excess of SFr1.75m).

During the 1970s and early 1980s, mechanical watches were viewed as antiquated technology rather than collectible antiques and the only people who purchased them were true enthusiasts, who were considered insane by the majority.

Gisbert Brunner, the renowned German watch author, has explained how as a young man in the 1970s he would buy old stock at knock-down prices from jewellers unable to sell mechanical watches in a battery age. Thirty years later these same watches are worth hundreds, perhaps even a thousand, times what he paid.

Today on occasion you can still find interesting pieces at flea markets, about which their vendors know little enough to allow you to make a profit. But with big auction houses extremely active in the promotion of specialised watch sales (there were about 50 last year), there are few surprises left.

The biggest growth and most active trading is in branded wristwatches of the postwar era.

A watch does not even have to be particularly old. While prices rise into six and seven figures for older exotic pieces, complicated watches by Patek Philippe that have ceased production only recently are starting to soar in value as collectors realise that their number is now finite while demand is likely to grow.

The relaunch of Panerai has also created a collectors’ market that did not exist until a decade ago. And as Patek Philippe and Rolex watches climb beyond the reach of many collectors, brands such as Omega, Breitling and Heuer, which made interesting sports watches, have seen prices for classics appreciate.

With prices for desirable models rising with almost every appearance at auction, there is plenty of information to allow experts and collectors to predict future values and tip models for future performance.

Books on the subject abound. Auction catalogues are increasingly scholarly, with increasingly helpful indicators of condition, provenance and originality of components.

There are also sophisticated web-based tools for assessing the current value of any given watch.

For instance, Antiquorum, the watch auction house, is set to launch an instrument called My Collection, which will track auction prices: subscribers will just type in as much detail as possible along the lines of production reference, year of manufacture, dial colour, case metal and even whether the case-back is snap or screw-on and then see a graph depicting the performance of that timepiece.

Perhaps we shall even see the horological equivalent of day trading before too long.

Newman dial leads Rolex successes

If you bought a Rolex Daytona with the exotic “Paul Newman” dial in the late 1980s you can congratulate yourself on a sound investment.

The watch is now changing hands for up to 15 times what you paid for it back then.

Other Rolex successes at auction have included the Milgauss, an anti-magnetic watch developed for scientific use that was a slow seller as a production model but that has since taken off at auction.

A reference 6541 from the early 1950s, with the sought- after lightning bolt hand, sold for $69,620 in December at an Antiquorum sale.

“I think the Paul Newman is the most famous and desirable,” says Osvaldo Patrizzi of the specialist auction house. “But the pre-Daytona has made a big jump, and if it is in good condition with box and papers, it can reach up to £60,000 (about $120,000), while in a normal condition that watch would reach £20,000.”

Patek Philippe nurtures image

The bluest of blue-chip timepieces, Patek Philippe continues to outperform its rivals, with even modern watches achieving significant prices.

“Modern Patek Philippes such as the 3970 chronograph are very hot,” explains Paul Maudsley of Bonhams auctioneers. “Also, examples with lots of complications such as the 3974 minute repeating watch which we sold an example of last May for £355,000 (about $700,000) are very much in demand.”

In recent auctions the prices of 1970s models such as the Jumbo Ellipse and the Jumbo Nautilus have risen: their size means they remain highly wearable in today’s market and as prices for earlier models rise, collectors are “discovering” the 1970s.

Over the years Patek has created an atmosphere of government bond-like “investability” around its products. Its clever advertising campaign with the line “You never actually own a Patek Philippe. You merely look after it for the next generation” encourages investors to look at today’s Patek Philippes as the auction stars of the future.

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