The luxury watch market presents opportunities for the savvy investor

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I have been a collector of horological instruments for over 30 years. Despite the current meteoric rise in prices, some watches continue to present an opportunity for long-term appreciation and market diversification.

Here’s why.

Highlights of the current watch market

A recent New York Times article rhetorically postulates: Do Watches Present a Bitcoin-Like Growth Opportunity in 2017? Or are they in a Bitcoin-like bubble in 2017? I agree with the first, although some watch dealers and collectors disagree.

The recent increase in the value of certain watches is unprecedented. It is mainly attributed to increased rarity, which can be attributed to 3 main factors:

1. Increase in market demand

2. Disruption of the production chain linked to Covid

3. Market manipulation by manufacturers and other major market players (i.e. large dealers, auction houses, even whale collectors)

The watch market is like the art market. There is no real industry watchdog, aftermarket players need no training or licensing, and manufacturers only influence certain designated official collectors and dealers. It’s a real laissez-faire market – the kind celebrated in Ayn Rand’s novels and Milton Friedman’s thoughts on the market economy, and not unlike other alternative asset markets. .

Driven by the passion of collectors, hedging on rising inflationary risks, and aggressive industry promotion, complicated watches appeal to tradition and exclusivity to attract collectors, speculators, and Instagram show-offs. The ultra-luxury watch industry markets ambitious and coveted expressions of craftsmanship as if watches were old master paintings, family acquisitions and alternative investments. Keep in mind that only men’s watches enjoy or have a robust secondary market. Women’s watches are relegated to the world of accessories and, for the most part, are not an investment.

Rolex is king

Rolex displays at authorized dealers are empty these days, and if you want a stainless steel sports Rolex (i.e. Daytona, Explorer, Submariner, Sea Dweller, Air King, Sky Dweller), you’ll probably pay a large premium and will be forced to buy into the secondary market. Many industry experts do not see the value of Rolex watches dropping. Unlike the ethereal grand complications sought after by most collectors, Rolex positions itself as a durable professional instrument capable of withstanding extreme conditions.

Rolex is different in that it is not a creative display of time and is not a company that prides itself on craftsmanship. It makes ambitious and anachronistic devices for professionals who tune in to the pre-Swatch/Seiko days before the quartz and smartwatch revolutions. It celebrates the daring explorer type (i.e. Marlboro man, aviator, adventurer).

If you want a terrific sports Rolex, you’ll spend at least $15,000 and if you want a stainless steel Daytona, $40,000 and escalation. There is tremendous opportunity for price appreciation when purchasing older Rolex chronographs. These are still undervalued.

Related: Costly Mistakes to Avoid When Pricing a Luxury Design Startup

The metamorphosis of Patek Philippe

Patek Philippe has become a dominant status symbol for the wealthy and has now made its way into popular culture, trading some of its elite mystique for higher production and more money. Patek’s sports watches such as the Nautilus and its historically less favored half-brother, the Aquanaut, are now objects of obsession for new kinds of money. A friend of mine just bought the Tiffany Nautilus at auction for over $5 million. Patek’s hegemony in the market has made its owners, the Stern family, billionaires, but its legacy at auction portends continued future appreciation.

Audemars Piguet is above all a sporting juggernaut

What its eponymous chairman, François Bennahmias, had done for Audemars Piguet is analogous to what Tom Ford once did for Gucci – reinvented it (and saved it from near inexorable collapse). Today, AP is a powerhouse and makes far fewer watches than Rolex and Patek. AP has become the aspirational symbol of the tennis player, the regatta team or the Formula 1 driver.

By contrast, Rolex appealed more to the rugged type – the mountaineer, the deep-sea diver and even the first responder – until the very recent price spike that made watches inaccessible to most blue-collar professionals. AP’s Royal Oak and Royal Oak Offshore are the brand’s most sought-after lines and, despite the recent surge, they should continue to appreciate.

On the same subject: The rise of responsible luxury

Omega is a relative affair

Omega watches have gone to the moon, been used for countless Olympics and have been featured in James Bond films. The Omega watches that are likely to continue to rise in price are the Speedmasters and Seamasters; these are considered good investments and are more affordable than Rolex and the ultra-luxury Patek and AP. It’s a brand with a great heritage that is less ostentatious than Rolex, but markets itself to a similar audience.

Other brands are worth considering, but will require more research and likely involve higher risk.

If you want to resell to make money, stick with Rolex, Audemars Piguet, Patek Philippe and to some extent Omega. You can venture on other brands, but be aware that the market outside of certain models of these 3 to 4 brands is fraught with pitfalls. Of course, all these considerations matter less if the objective is to acquire a watch that “speaks to you”, and reselling it is a secondary or tertiary concern.

If you’re venturing outdoors, look for sports watches that look cool (but could be overlooked) from strong brands or grand complications and limited editions. Check auction results before buying.

There is no watch bubble

Despite the unusual market spike, watches remain a good alternative investment. I believe horological instruments are still a nascent market and demand will continue to grow as watches represent an alternative asset class that is collectible, highly wearable and rare given the growing market demand. Collectible watches are imbued with a certain craftsmanship – an old-world skill set that combines the prowess of micro-engineering with the flair of a master jeweler or artist.

Also, as many collectors point out, you can’t wear your Ferrari on your wrist and bring it into the corporate boardroom, but you can bring your watch. Therefore, taking a longer-term position in good watches, even during this unprecedented market frenzy, is a smart move.

Related: How and Why Luxury Brands Should Embrace TikTok

About Theresa Burton

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