Is Collector Watch Market An Opportunity For Value Investors?
By David Thompson
Aug 04, 2023 04:29 PM EDT
Aug 04, 2023 04:29 PM EDT
Is Collector Watch Market An Opportunity For Value Investors?(Is Collector Watch Market An Opportunity For Value Investors?) (Credit: Getty Image)
The luxury watch market is confusing for outsiders. Watches, sometimes known as horological instruments, are valued for their functionality and brand appeal. Collectors monitor auction sales, attend industry events and secretive fancy dinners where bragging rights and memorized model numbers or industry gossip become currency of choice.
Nascent collectors can overpay or be defrauded for watches that they find appealing. Investors, on the other hand, are starting to look at watches as an alternative asset class in their portfolios of equities, mutual funds, and real estate. They can benefit from a buy and hold strategy in collectible watches, but "their success is predicated on selecting often overlooked watches rather than buying what everyone else has," points out Shery Zarnegin, principal of Klockchain, a luxury watch online auction.
Zarnegin, who had launched a luxury jewelry line before becoming an entrepreneur in the horology industry, grew up in Los Angeles, but was born in Iran. After launching, operating, and ultimately selling the watch auction platform that she developed with her team of industry experts and technologists, she learned important lessons about the watch market, that she explains is distinct from the jewelry market where she was a creative force for years. Thoughtful and spiritual, Shery Zarnegin lights up when discussing the old world of mechanical artisanship and the new world of blockchain and online auctions.
"Even brand driven jewelry is an accessory - even heirlooms; jewelry's secondary market value does not fluctuate much," posits Zarnegin sitting in her Miami Beach watch poster decorated office. Alternatively, she observes, "watch industry is often used to transfer value, and watches are often regarded as a hedge for inflation". Rolex, and now Patek Philipe and Audemars Piguet have proven that watches appreciate and can yield a formidable return, Zarnegin points out. Yet, not all models from these eponymous brands appreciate or even sell. Jules Audemars line, Rolex Cellini and annual calendars from Patek are slow to move. Newcomers to the collector space are independents such as F P Journe, Richard Mille, Urwerk and MB&F. They have appreciated but are a high risk than legacy brands.
According to Harpers Bazaar, Steven Kivel of Central Watch, a watch service center and restoration company in New York, said, "For me, Patek Philippe and Rolex are the two brands that stand out in terms of investing, they're like buying stocks in Apple or Microsoft."
Zarnegin and her team at Klockchain deployed technology to streamline and authenticate watch transactions beyond the listing models of chrone24, legacy auction houses, and eBay, which finally incorporated certain failsafe features into its model of a generalist online auction. According to Zarnegin, investors should focus on overlooked models that have valuable features such as complications and are available in limited quantities. Complications in the watch industry refer to functions in a mechanical watch that go beyond telling hours, minutes, seconds, and date. These can be chronographs that could be used to time events, perpetual calendars that self-adjust to different months, and repeaters that generate a mechanical chime to sounds off the time.
Unlike jewelry, investment watches are mostly valued for their functionality, but the brand and market demand are still important factors, explains Zarnegin, having earned her stripes in the jewelry industry.
According to New York Times', Alex Williams, "next-generation collectors see old timepieces not just as a subtly stylish way to dress up a T-shirt and jeans, but also as a hot new asset in their investment portfolios".
"Therefore, in the event of an economic downturn, fine watches may turn out to represent a safe-haven asset, like metals or gems, for investors looking to diversify their portfolios," he observes for the Times.
At auctions, "focus had been on contemporary watches, but tastes have changed and there is recognition that vintage watches are more collectable," Thomas Perazzi, Head of Watches Phillips Asia said. Zarnegin also posits that certain limited editions or watches that exhibit rare or unique features or meaningful collaborations are important for investor-collectors. However, with certain brands or even lines within strong brands limited editions may not mean much. Most of the limited pieces with brands such as Breitling do not signal a short-term appreciation opportunity and some collaborations such as Ferrari and Girard Perregaux or Panerai have not had meaningful impact on the market. In the 1980s Patek Philippe was more open to accommodating unique dials or hands for its loyal collectors. These features now command a great deal of money at auction.
Zarnegin explains that successful watch investors need to become technology savvy and embrace online auctions that avail them of broad buying options rather than relying on authorized dealers or watch brokers. The former has limited knowledge and the latter are often too commercial, she tells us. Both tend to focus on selling their own portfolios or lines rather than curating a true investment collection.
According to London's The Week, "investors' options are limited to only a few avenues which will prove beneficial in the long term, said Joseph McKenzie, founder of pre-owned luxury site Xupes." Property, collectable cars, wine and art are all viable options for investors looking to augment a conventional portfolio. However, horological instruments such as vintage Rolex and Patek Philippe watches are more portable and may offer greater long-term appreciation.
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