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High-End Watches: Prices Keep Ticking Along

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It’s been a good time for timepieces: a recent Christie’s auction in Geneva generated over $29 million in sales. According to the auctioneer, Patek Philippe watches played the leading role, breaking numerous world records. Rolex, Vacheron Constantin, Audemars Piguet and Cartier also had strong results.

Standouts included the 1953 Rolex Neptune, which sold for about $670,000 or five times its estimate, as well as a 1945 Rolex and a 1910 Vacheron Constantin scarab-form pendant watch. The top lot of the sale was a rare pink-gold calendar wristwatch with moon phases,manufactured in 1968 by Patek Philippe: It went for more than $2,338,000 and set a world record price for this reference at auction.

Of course, record prices also raise the prospect of an overheating market, according to a recent Wall Street Journal piece, which highlights several examples of impressive price appreciation of Rolex watches. The article also cites a cautionary note, from watch-price expert Ken Specht of the “The Specht Sheet,” that Rolex produces many more watches today than in the past. That increased supply is likely to dampen current models’ price-appreciation relative to rarer, older models.

Is it still a good time for clients to invest in timepieces? AdvisorOne queried Alfredo Paramico, the manager of Elite Advisers’ Precious Time Specialized Investment Fund in Luxembourg for his thoughts on the watch market. The fund generated a nearly 12% return in 2011 and has been actively seeking acquisitions for its portfolio.

AdvisorOne: How would you describe the watch market’s performance for 2011 and so far in 2012?

Paramico: The watch market performance in 2011 has been extremely positive for almost all the brands. This increase, mainly driven by auction houses results, will very likely continue in 2012.

We have seen some very important watches sold very high, like the unique pink-gold Patek Philippe perpetual calendar (ref. 3448), sold for 2 million Swiss Francs; the unique white-gold single pusher Patek Philippe chronograph sold for 3. 3 million Swiss Francs; and the very rare split-second Rolex sold for $1.1 million. This was the first Rolex ever to hit the $1 million-threshold level. In 2011, we broke at least 15 world records, mostly Patek Philippe.

AdvisorOne: Are any segments of the market exhibiting particular unusual strength or weakness? And to what factors would you attribute that strength or weakness?

Paramico: Certainly the main segments are high quality and important complicated Patek Philippe and Rolex sports models. When found still with the original package (inner and outer boxes, certificate of origin, COSC Certificate [Contrôle Officiel Suisse des Chronomètres, the Official Swiss Chronometer Testing Institute], tags and booklets), they are very expensive but extremely sought after by collectors worldwide.

AdvisorOne: News reports often focus on the prices paid at the top end of the market, i.e., the multi-million dollar watches. Should collectors and Precious Time fund investors be concerned about the risk of a bubble in collectible watch prices?

Paramico: I personally think we are very far from the risk of a bubble. This market is still very young and is getting more and more mature year by year.

I think we are just now giving the correct and fair valuation to important watches. I foresee much higher prices in the forthcoming years. Important watches are much rarer than what we think.

AdvisorOne: Given the higher prices being paid, how does the Precious Time fund avoid overpaying for a watch?

Paramico: We usually buy from private collectors and during the most important auction fairs. It is obvious that the nicest watches are sold with a premium but most of the times this tiny premium will bring a huge value at the watch. We buy at auctions when we see a good opportunity.


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