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Investment
Fine Wine Investing: How Cult Wine Investment Finds The Next High Value Wine And Region – Forbes
Tom Gearing grew up in the world of fine wine with a father who was an avid collector, so it may not seem that strange the he founded one of the first wine investment firms in the world. After growing up in England with many buying trips with his father to Burgundy, Bordeaux and other fine wine regions of Europe, Gearing decided to establish his company while still in college. With help from his investment banker father, they set up an office in their house and launched Cult Wine Investment in 2007. Today that business has $320 million worth of assets under management, 1.25 million bottles of wine in their temperature controlled warehouses, and employs over 100 professionals with clients located in 83 countries.
“Many people don’t realize that fine wine has a solid investment track record. For example, since 2009, the Cult Wines Index returned +194% (8.89 CAGR),” reports Gearing. “Even in the challenging 2022 market, our second quarter return was +4.73%.” During that same quarter the S&P was down -16.1% and the Nasdaq was -22.47%.
“In general,” Gearing continues, “fine wine has an overall return of around 9 to 10% per year.” However, there have been some very healthy returns on individual wine brands. For example, according to Cult Wine’s database, Emidio Pepe Montepulciano d’Abruzzo from Italy achieved a 78% return over 3 years; whereas Chateau Rayas from Chateauneuf de Pape in the Rhone region of France climbed 198% over the same time period.
Tom Gearing, CEO and Co-Founder of Cult Wine Investment
Cult Wines
“Fine wine investing is a good way to diversify a portfolio,” states Gearing. “Plus there is always the option to drink the wine at a later time if you decide not to sell it.”
Creating a Fine Wine Investment Portfolio
Just as investors make the decision of what percentage of blue chip stocks, small caps, emerging market, and other categories they want in their portfolio, so do wine investors. “We work with each investor to develop a fine wine investment strategy,” explains Gearing. “For example, if they prefer lower risk but with more modest returns, we generally invest in ‘blue chip’ wines such as Bordeaux and Burgundy, which have a solid track record. But if they want exposure to the most exciting and upcoming wines from new producers or regions, we may create a combined portfolio of emerging producers combined with ‘blue chip’ wine producers.”
Gearing explains that the minimum investment time for fine wine is 3 to 5 years, so in creating a personalized portfolio for each investor they not only consider risk appetite, but also time horizon and investment level. For example, one portfolio may consist primarily of wines from Bordeaux, Burgundy, Champagne and California; while another includes all of these, plus wines from Rhone, Italy, and other parts of the world. In tracking wine and region performance, Cult Wines also works closely with Liv.ex and the Liv.ex 1000 index, the broadest measure of the fine wine market.
Fine Wine Market Returns for 2nd Quarter 2022. Source: Liv-ex 1000 and regional indices’ Q2 and YTD … [+]
Cult Wines and Liv.ex
There are four major plans, with the entry level called Cru Classe for a minimum investment of $10,000. The next levels are: Premier Cru, starting at $35,000; Grand Cru from $150,000; and Cult Cru from $700,000. Each level provides an increasing level of service and experiences, which may include invitations to wine tastings and/or visits with top producers around the world. Annual fees start at 2.95%, but this includes fees for storing the wine in temperature and humidity controlled warehouses in Europe, authentication of each bottle before purchase, insurance, and wine bottle condition checking. There are no performance or trading cost fees.
Investors can make changes to their portfolio at any time, including decisions to sell, trade, buy or drink the wine. “We currently have thousands of investors around the world,” reports Gearing with around 30% in Asia, 50% in the UK and Europe, and the other 20% from North America.”
In terms of competition, some of the other wine trading platforms include: Alti Wine Exchange, Vint, Vindome, and Vinovest. Cult Wine invests in actual physical bottles of wines, but other wine investment firms may do fractional or percentage ownership of wines.
How Cult Wine Investment Finds The Next Cool Investment Grade Wine or Region
So how does Cult Wine Investment decide which wines to include in their portfolios, and how do they identify the next cool wine producer or region? In answer to the first question, Gearing responds, “We have an investment committee that analyzes value and growth prospects for individual wines and regions.” This data is stored in a proprietary AI system, which analyzes such variables as production levels, vintage quality, critic scores, pricing levels, brand awareness, market trends, drinking windows, availability and many other criteria.
To identify up and coming investment grade wines or wine regions, Gearing explains, “We look for five major ingredients: high quality reputation, aging capability, high critic scores, resell potential and international visibility.” In the New World, many Napa Valley wines have managed to attain all five factors, but Gearing and his team are closely tracking other regions.
“We are fairly bullish about the state of the U.S. wine market,” he says. “We are expanding outside of Napa to look deeper into Oregon, the Santa Cruz Mountains and Santa Barbara. The new West Sonoma Coast AVA is exciting, and we see more potential there. Sonoma has struggled to have a reference point, because they never developed an equivalent of Screaming Eagle or Opus One, but now that Burgundy has gotten so expensive, there is a gap in the market for a special occasion pinot noir that really delivers. We wonder if Faiveley purchasing Williams Selyem in Sonoma will propel it into the spotlight, but only time will tell.”
Outside the U.S., Cult Wines is also currently tracking the Central Otago region of New Zealand, and other parts of Italy. Strangely, and perhaps sadly, the loss of grape crops to extreme frosts and wildfires in Europe, NZ, Australia and California, has caused the price of many fine wines to increase due to shortage issues.
Some Potential Future Investment Grade Wine Regions: West Sonoma Coast, Oregon, Santa Barbara
Getty Images
Cult X: Expanding the Business Model of Cult Wine Investing
After nearly 15 years in business, Cult Wine Investment is expanding its business model to launch a new wine trading platform later this year called Cult X. Gearing describes it as the next generation fine wine trading platform using blockchain technology and their extensive database analytics.
“We want to make fine wine prices more transparent,” states Gearing. “In the past it was difficult for collectors and wine enthusiasts to make clear decisions on wine purchases because price data was contradictory and incomplete. This new platform will make it easier for consumers to make informed decisions and get fair prices within the market.” There is no minimum investment and lower transactional costs for CultX, but Cult Wine Investment portfolio investors will benefit from direct market access as part of their current level of service.
In order to build the platform Cult Wines has developed a new partnership with Winesearcher.com to provide ten years of historical data and current pricing information. The new CultX platform will not only be a place to buy, sell, and trade individual wines, but have access to rare, limited edition and exclusive wines as well. For example, the company recently auctioned a 1-of-1 jeroboam of Romanée-St-Vivant 2017 produced by Olivier Bernstein through an exclusive partnership with Bernstein.
This type of special relationship with a fine wine producer, such as Bernstein, is the type of relationship that Cult Wines wants to continue to cultivate. “In the end, the world of wine is all about relationships,” explains Gearing. “And wine investing is additive to the eco-system of wine: it is good for the winery, the investor, and the consumer. It is a win-win-win.”
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Compound interest is a thing of magic. It’s also one of your best bets if you’re looking to retire rich.
It might take time and patience but there’s not a whole lot of heavy lifting when it comes to a buy-and-hold investment strategy. What matters most is having decades of time in front of you, which will allow you to maximize the benefits of compounded returns. And, of course, choosing the right investments is equally important.
The magic of compound interest
With a decent return, building a million-dollar portfolio might not be as hard as you think. An initial investment of $15,000, returning 15% annually, would be worth just shy of $1 million in 30 years.
First off, 30 years is a long time, which means you’ll need to be planning your retirement far in advance. However, all it takes is one initial investment of $15,000 and the right stocks to build a $1 million portfolio.
Additionally, it’s important to remain realistic and acknowledge that a stock returning 15% annually is not exactly common. That being said, the TSX certainly has its share of dependable companies with track records of returning far more than just 15% per year.
I’ve put together a list of three Canadian stocks that are perfect for hands-off investors who are looking to retire rich.
Constellation Software
It will require a steep initial investment, but Constellation Software (TSX:CSU) is well worth its nearly $4,000-a-share price tag. When it comes to market-crushing returns, the tech stock has been in a league of its own over the past two decades.
Even as the company is now valued at a massive market cap of close to $80 billion, the impressive returns have continued. Shares are up more than 200% over the past five years. That’s good enough for a compound annual growth rate (CAGR) of 25%.
At a 25% annual return, a $15,000 investment would be worth a whopping $12 million in 30 years.
Descartes Systems
Descartes Systems (TSX:DSG) is another tech stock that’s no stranger to delivering market-beating returns. The company is also only valued at a market cap of $10 billion, leaving plenty of room for growth in the coming decades.
There’s a reason why Descartes Systems is one of the few tech stocks trading near all-time highs today. This stock is a proven winner, with lots of growth left in the tank.
Over the past five years, the stock has had a CAGR just shy of 20%.
goeasy
The last pick on my list is a beaten-down growth stock that’s trading at a serious discount.
The consumer-facing financial services provider has been hit by short-term headwinds from sky-high interest rates. With potential rate cuts around the corner though, now could be an excellent time to be loading up on goeasy (TSX:GSY).
Even with shares down 25% from all-time highs, the stock is still nearing a return of 300% over the past five years.
goeasy was crushing the market’s returns before the recent spike in interest rates, and there’s no reason to believe why the company won’t continue to do so for years to come.
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TORONTO, April 24, 2024 /CNW/ – Flagship Communities Real Estate Investment Trust (the “REIT” or “Flagship“) (TSX: MHC.U) (TSX: MHC.UN) announced today that it has completed its previously announced public offering (the “Offering“) of 3,910,000 trust units (the “Units“) on a bought deal basis at a price of US$15.35 per Unit for total gross proceeds to the REIT of approximately US$60 million.
The Offering was completed through a syndicate of underwriters co-led by BMO Capital Markets and Canaccord Genuity Corp.
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The REIT intends to use the net proceeds from the Offering to fund a portion of the approximately US$93 million aggregate purchase price for the REIT’s previously announced acquisition of seven manufactured housing communities comprising 1,253 lots (the “Acquisitions“) and for general business purposes. In the event the REIT is unable to consummate one or both of the Acquisitions, the REIT intends to use the net proceeds of the Offering to fund future acquisitions and for general business purposes.
The REIT has also granted the underwriters an over-allotment option to purchase up to an additional 586,500 Units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the date hereof.
About Flagship Communities Real Estate Investment Trust
Flagship Communities Real Estate Investment Trust is a leading operator of affordable residential Manufactured Housing Communities primarily serving working families seeking affordable home ownership. The REIT owns and operates exceptional residential living experiences and investment opportunities in family-oriented communities in Kentucky, Indiana, Ohio, Tennessee, Arkansas, Missouri, and Illinois. To learn more about Flagship, visit www.flagshipcommunities.com.
Forward-Looking Statements
This press release contains statements that include forward-looking information (within the meaning of applicable Canadian securities laws). Forward-looking statements are identified by words such as “believe”, “anticipate”, “project”, “expect”, “intend”, “plan”, “will”, “may”, “can”, “could”, “would”, “must”, “estimate”, “target”, “objective”, and other similar expressions, or negative versions thereof, and include statements herein concerning the use of the net proceeds of the Offering.
These forward-looking statements are based on the REIT’s expectations, estimates, forecasts and projections, as well as assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies that could cause actual results to differ materially from those that are disclosed in such forward-looking statements. While considered reasonable by management of the REIT as at the date of this news release, any of these expectations, estimates, forecasts, projections, or assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations, estimates, forecasts, projections, or assumptions could be incorrect. Material factors and assumptions used by management of the REIT to develop the forward-looking information in this news release include, but are not limited to, that the conditions to closing of the Acquisitions will be met or waived in a timely manner and that both of the Acquisitions will be completed on the current agreed upon terms.
When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as they are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors, many of which are beyond the REIT’s control, could cause actual results to differ materially from the results discussed in the forward-looking statements, such as the risks identified in the REIT’s management’s discussion and analysis for the year ended December 31, 2023 available on the REIT’s profile on SEDAR+ at www.sedarplus.com, including, but not limited to, the factors discussed under the heading “Risks and Uncertainties” therein and the risk of the REIT’s plans with respect to debt bridge financing for the Acquisitions not being achieved as anticipated. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Forward-looking statements are made as of the date of this press release and, except as expressly required by applicable Canadian securities laws, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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Kim Moody: Ottawa is encouraging people to crystallize their gains and pay tax. That’s a hell of a fiscal plan
The Canadian federal budget has been out for a week, which is plenty of time to absorb just how terrible it is.
The problems start with weak fiscal policy, excessive spending and growing public-debt charges estimated to be $54.1 billion for the upcoming year. That is more than $1 billion per week that Canadians are paying for things that have no societal benefit.
Why? Well, for the CEI, virtually every entrepreneurial industry (except technology) is not eligible. If you happen to be in an industry that qualifies, the $2-million exemption comes with a long, stringent list of criteria (which will be very difficult for most entrepreneurs to qualify for) and it is phased in over a 10-year period of $200,000 per year.
For transfers to EOTs, an entrepreneur must give up complete legal and factual control to be eligible for the $10-million exemption, even though the EOT will likely pay the entrepreneur out of future profits. The commercial risk associated with such a transfer is likely too great for most entrepreneurs to accept.
Capital gains tax hike
But the budget’s highlight proposal was the capital gains inclusion rate increase to 66.7 per cent from 50 per cent for dispositions effective after June 24, 2024. The proposal includes a 50 per cent inclusion rate on the first $250,000 of annual capital gains for individuals, but not for corporations and trusts. Oh, those evil corporations and trusts.
Some economists have come out in strong favour of the proposal, mainly because of equity arguments (a buck is a buck), but such arguments ignore the real world of investing where investors look at overall risk, liquidity and the time value of money.
If capital gains are taxed at a rate approaching wage taxation rates, why would entrepreneurs and investors want to risk their capital when such investments might be illiquid for a long period of time and be highly risky?
They will seek greener pastures for their investment dollars and they already are. I’ve been fielding a tremendous number of questions from investors over the past week and I’d invite those academics and economists who support the increased inclusion rate to come live in my shoes for a day to see how the theoretical world of equity and behaviour collide. It’s not good and it certainly does nothing to help Canada’s obvious productivity challenges.
The government messaging around this tax proposal has many people upset, including me. Specifically, it is the following paragraph in the budget documents that many supporters are parroting that is upsetting:
“Next year, 28.5 million Canadians are not expected to have any capital gains income, and 3 million are expected to earn capital gains below the $250,000 annual threshold. Only 0.13 per cent of Canadians with an average income of $1.4 million are expected to pay more personal income tax on their capital gains in any given year. As a result of this, for 99.87 per cent of Canadians, personal income taxes on capital gains will not increase.” (This is supposedly about 40,000 taxpayers.)
Bluntly, this is garbage. It outright ignores several facts.
Furthermore, public corporations that have capital gains will pay tax at a higher inclusion rate and this results in higher corporate tax, which means decreased amounts are available to be paid out as dividends to individual shareholders (including those held by individuals’ pensions).
The budget documents simply measured the number of corporations that reported capital gains in recent years and said it is 12.6 per cent of all corporations. That measurement is shallow and not the whole story, as described above.
Tax hit for cottages
There are also millions of Canadians who hold a second real estate property, either a cottage-type and/or rental property. Those properties will eventually be sold, with the probability that the gain will exceed the $250,000 threshold.
And people who become non-residents of Canada — and that is increasing rapidly — have deemed dispositions of their assets (with some exceptions). They will face the distinct possibility that such gains will be more than $250,000.
The politics around the capital gains inclusion rate increase are pretty obvious. The government is planning for Canadian taxpayers to crystallize their inherent gains prior to the implementation date, especially corporations that will not have a $250,000 annual lower inclusion rate. For the current year, the government is projecting a $4.9-billion tax take. But next year, it dramatically drops to an estimated $1.3 billion.
This is a ridiculous way to shield the government’s tremendous spending and try to make them look like they are holding the line on their out-of-control deficits. The government is encouraging people to crystallize their gains and pay tax. That’s a hell of a fiscal plan.
I hope the government has some second sober thoughts about the capital gains proposal, but I’m not holding my breath.
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