Many alternative investments soared in value in 2006. As the recent record prices paid for various paintings show, some markets are firmly in bubble territory. However, there are others worth investigating so anyone hunting for a special Christmas gift should consider these tips from our experts: collectables specialist Jamie Breese recommends four great gifts, while in the box below wine expert Justin Gibbs selects the vintages that will outperform in 2007.
A fine antique or rare collectable makes a great Christmas present. Not only does it show a genuine interest in the recipient's finer tastes, but better still, the gift is likely to grow in value over the years. Of course, alternative investments are prone to the same market forces as other assets. But a well-chosen piece has a strong chance of appreciating in the long term, and that's a lot more than can be said for a woolly sweater or gift voucher. Here are four different areas I believe represent good value for those seeking the perfect Christmas gift.
Alternative Christmas presents: Modern first-edition books
Few presents are more personal than a first-edition book by a favourite author. One sector worth exploring is modern first editions, which broadly covers titles published between 1900 and 1995.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
A first edition is not the first book off the printing press as some of the prices might make us believe but the very first run of published books. Initial print runs for unknown writers are usually low, so a popular author's first works tend to rise in value rapidly as demand outstrips supply. To identify a true first edition, look for a single date on the title page.
If it is followed by second impression' or re-published in', then it's no gem.
As a rule, you should be looking for the first impression of the first edition. Another crucial factor is condition. If the book is damaged in any way, the value drops, however scarce the title. The best possible state is Fine in a fine jacket' (dust jacket, or DJ') and the condition of the dust jacket is often of equal importance check to see if it has been price-clipped, for example. Try to avoid ex-library copies and those bearing inscriptions or the presence of an owner's bookplate; but an author's signature makes for a perfect finishing touch to the present and adds value too.
In the case of first editions as Christmas gifts, I'd go for a title by a well-known author whom the recipient enjoys. Writers to consider include Philip Pullman, Agatha Christie, Graham Greene, JRR Tolkien, AA Milne, PD James, Henry Williamson, Ian Fleming, Arthur Conan Doyle and JK Rowling.
Best buy: Rare book dealer Adrian Harrington says: "Historically, Ian Fleming's James Bond has performed very well and remains probably our bestselling author in the modern first editions. It is the condition which creates the rarity. We recently sold an absolutely mint copy of Casino Royale for £25,000 and currently have one for sale for £12,500, which is in lovely condition."
Adrian Harrington Rare Books is based in Kensington, London
(www.harringtonbooks.co.uk, 020-7937 1465). Or MoneyWeek's own
Euan Stuart runs a rare book shop, First State Books, specialising in
modern first editions (www.firststate books.com, info@firststatebooks.com, 020-7792 2672).
Collecting books: For a full guide to investing in collectable books, click here.
Alternative Christmas presents: Minton Majolica
Thomas Minton founded his eponymous firm in 1793. Majolica is a type of earthenware that was introduced by Minton to the Western world at the legendary Great Exhibition at the Crystal Palace in London in 1851.
It is an enduring heavyweight' of the antiques market, though prices have fluctuated. In the 1990s, prices were hit by the recession, while demand also dropped off after the September 11th terrorist attacks and has yet to recover fully because the main collectors of Majolica are based in the US.
"It's only really the rare and unusual forms that are making as much as pre-September 11th," says leading ceramics expert Phil Howell of Sotheby's.
"The more common, plentiful wares have undergone a downturn in value." As such, he believes now "is a good time to buy". In a recent sale at Christie's, some more affordable pieces included two Oyster Plates, which carried the year ciphers for 1888 and 1889. Put on at an estimate of £400-£600, they made a quite respectable £1,920 on the day but a dealer might be able to offer something similar for closer to the estimated value. Auction prices can, of course, depend on who is present and how keen they are to buy one can imagine that the dollar's current weakness may mean less competition from US buyers for these great pieces.
Best buy: Any of the smaller pieces in the £250-£1,000 band. According to Rod Woolley of Christie's, "people get this impression that all Majolica is worth an absolute fortune you can still actually pick pieces up reasonably affordably at auction".
Both Christie's (www.christies.co.uk) and Sotheby's (www.sothebys.co.uk) hold sales featuring Minton Majolica.
Alternative Christmas presents: Autographs
Interest in autographs has surged since the mid- to late-1990s so much so that top dealers now offer investment-standard portfolios, many of which have done very well. For example, a full set of Beatles autographs has moved from having an auction value of around £500-£1,000 to commanding many thousands at present. One top dealer reckons the value of an undedicated signed photo has jumped by 254% between 1997 and 2005. But bear in mind that the market is prone to changes in fashion; many items relate directly to the current fame of an individual, which, as we all know, can go down as well as up.
When buying autographs as gifts, there are some general points to remember:
- An autograph on a scrap of paper or inside an autograph book is traditionally worth less than one on a hand-written letter, poster or photograph. But if that scrap of paper happens to be an early Beatles concert handbill then, of course, it's going to be worth a bit more.
- A signature in ink is considered more reliable in the long run than pencil.
- A personal inscription to a fan along with a signature is usually worth less than a good, clear signature on its own. This is because of the way it affects the later sale of the item, especially to those seeking gifts.
- The bigger a signed photograph, the better. The standard signed print is 10" x 8". Many are pre-signed by pop or movie stars in bulk, then distributed upon request by their representatives. Beware of facsimile autographs' those printed onto photographs. These are worth very little.
- Condition and authenticity are of utmost importance. Ask questions on provenance before buying any autographed item.
Best buy: Specialists Famous Retail favour music memorabilia: "The Beatles have always been a popular choice and with the recent interest in Paul McCartney's autograph the trend looks set to continue."
Famous is one of Europe's largest sellers of autographed sporting and celebrity memorabilia (www.famousretail.com)
Alternative Christmas presents: Corgi toys
Despite having changed hands more times than I could mention, the Corgi brand name has turned 50 this year: an incredible feat in a world of playthings transformed by the rise of video games and other electronic distractions.
Few manufacturers can claim to have created so many icons, including the Yellow Submarine, the silver 007 Aston Martin DB5 and the Batmobile Corgis.
Original Corgis are in great demand. When the firm opened in 1956, it offered just ten models. The first was the Ford Consul, which cost a most affordable 2s 9d. To today's youth, this might seem less exciting than a Bond tie-in, but in the 1950s every boy wanted a car like his dad's and it was a hit.
Investing in toys: If you'd like to know more about identifying trends in the toy collectors' market, click here.
There's a well-established system of trading with terms to describe both the condition of the box and the toy itself. This is a good sign for future investment potential. Currently, a boxed Corgi Chitty Chitty Bang Bang makes £300-£500, depending on condition.
The whole TV and film toy market has grown massively and it's certainly harder these days to find pristine (or mint) finds in their boxes because, of course, toys and especially toy vehicles are made to be played with.
In my experience, some collectors find it hard to relate to the older, pre-war items, so it's the cult classics that make for the best gifts. Gems include The Avengers Gift Set, The Batmobile, any of the Noddy Toys and, of course, the iconic Yellow Submarine all from the 1960s or early 1970s.
Best buy: The Aston Martin DB5 (pictured below) was voted Toy of the Year' in 1965 by the Toy Retailers Association. The firm went on to sell more than three million of them. The definitive present would be a mint and boxed silver car (it was also sold in gold), clean and complete with the special Secret Instructions' booklet.
The presence of the Korean agent in the passenger seat will add to the toy's value. These cars currently sell for anywhere between £350 and £500.
Vectis are specialist toy auctioneers who work closely with Corgi.
For more information, go to www.vectis.co.uk, or call 01642-750616
Jamie Breese's new ebook, Make A Mint! The Ultimate Guide To Buying And Selling Collectables, can be downloaded for £12.99 from www.jamesbreese.co.uk.
Buy into wine's maturing bull market
As with most asset classes in 2006, the fine wine market has enjoyed stellar returns, writes Justin Gibbs of Liv-ex. Our two indices, the Liv-ex 500 and the production-weighted Liv-ex 100, have seen year-to-date gains of 24.4% and 43.2% respectively. Yet it seems there is still more money than wine in the market and certainly nobody is over-stocked at least not in the great wines. After such gains, a pause for breath must be healthy, but any pull back should be seen as a buying opportunity. There is still very little awareness in the wider world that there is currently a bull market in wine. As such, the current run seems to have legs.
While the weak US dollar has subdued American demand, new markets such as India, China, Russia and the Middle East have compensated. And fine wine prices are really just playing catch up. In the four years up to July 2005, the Liv-ex 100 rose just 9%. So while the index is up 47% over the last year, it is only up 60% over five years pretty good, but certainly not ridiculous.
Investing in fine wines: See also, Wine matures as an asset class and Fine wine prices will keep rising.
In addition, the internet has made reliable data (see www.liv-ex.com for examples) accessible to a wider audience, which has increased confidence and given fine wine more credibility as an asset class. This state of affairs has been helped by recent academic research suggesting that, over the long-term, fine wine generates comparable returns to equities and that the storage and dealing costs are more than compensated for by the tax benefits (in most cases, fine wine is not subject to capital gains tax in the UK). Unsurprisingly, this has brought investing in fine wine to the attention of professional investors, leading to the launch of several new wine funds. As a result, a lot of new money has come into the market although with less than £50m invested so far, this trend is still very much in its infancy.
So far, picking the right wines to buy has not been rocket science. If we look at wines in the Liv-ex 500 index, for example, buying high-scoring wines and the top Bordeaux brands has been a winning strategy (see chart opposite). Buying Bordeaux First Growths has been the best ploy of all, delivering more than twice the return of either lesser Bordeaux wines, or wines from all regions scoring 95 points or more. It is not just superior quality or vanity that has caused investors to chase these wines higher. First Growths have big advantages in terms of both liquidity and net returns (that is, returns after storage costs).
With a luxury product like fine wine, where the very rich will pay almost anything to get the very best, it is likely that the great wines will always outperform over the long term. But as the bull market matures, there will be opportunities to make money in lesser wines too, as buyers decide the great wines from the great vintages are expensive enough. It is here that the old demand/supply equation will hold true. As wines mature and become more scarce (whether they be 88 or 98 pointers), their value will rise. Here are five that look like good bets.
Mouton Rothschild 1998: 95 Parker points and recent trade tastings suggest more improvement to come. Good value at £1,500 a case.
Gruaud Larose 2000: 94+ Parker points from the legendary 2000 vintage. It has underperformed the market, with a gain of only 20% over two years. A buy at £600.
Lafite Rothschild 1999: not regarded as a great year and yet all the First Growths performed well in the critics' eyes. There are very few Lafites you can buy at £1,500 a case these days and none that carry 95 Parker points.
Leoville Barton 1996: one of the favourite tipples of Bordeaux connoisseurs. Recent vintages have been so strong, new price points have been set; 2000 (£850); 2003 (£900); 2005 (£680). The 1996 is dwindling in supply, costs only £500 and is well rated.
Mouton Rothschild 2004: a potential collectors' item; the label will feature a painting by Prince Charles to celebrate 200 years
of the Entente Cordiale. For £1,150 you should be able to buy this Parker 93 pointer.
Justin Gibbs is director of Liv-ex.com.
The £15m collection of stamps
Reeling from a market crash that saw some collectors lose up to 75% of their investment in the 1980s, stamp collecting was long out of favour with investors. However, following the appearance of a previously unknown collection in 2004, new life has been injected into a market long thought to be suffering from dwindling interest and the emergence of email.
The discovery of Sir Gawaine Baillie's Aladdin's Cave' of stamps (some of which are pictured, right) astonished the market in 2004. The collection was of the highest quality and was also by far the largest to appear in the last ten years, says Adrian Roose of Stanley Gibbons. Broken down into ten separate auctions and with an initial estimate of £11m, nine have since sold for more than £15m at Sotheby's in London. The remaining lot goes up for sale in January, at a low estimate of £500,000.
Having devoted four hours a day to his collection of more than 100,000 stamps, Baillie was well able to separate the wheat from the chaff, but what of those hunting for the perfect present for the stamp collector in their life? David Wright, philatelic specialist at Bonhams, says that early Great Britain and Commonwealth material tends to sell well in auctions, while Roose says that Stanley Gibbons only recommends Queen Victoria through to George V. "If you look at this Christmas's run of stamps, over 400 million will be printed. They will be worth nothing. But looking at the Queen Victoria era, only about 60,000 were printed of certain issues."
Andrew Claridge of Grosvenor Philatelic Auctions says that for anyone looking to spend less than £1,000, he would suggest an 1841 Penny Red, the Penny Black's little brother. An unused one will go for around £400, a used one £15. Also, a used Penny Black in "quite nice condition" will cost £150.
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.