The Overviews
– Similar for watch owners, those who owned sports Rolex, sports Patek Philippe (PP), Richard Mille (RM) benefitted as the prices soared; those who didn’t have to spend 40-50% more money to by a Nautilus or Daytona.
– Social media at work. There is an increasing trend of social media influencing the watch market. It is definitely true we are spend more time on social media now, and we do listen to bloggers or influencer when doing our research on the next watch purchase. This unfortunately leads to certain amount of unnecessary speculation. A good example was the circulation of rumors about a certain Daytona getting discon, which caused the grey market price shoot up 50% in just 2 weeks, right before Rolex announced the 2021 novelties.
– Watches as investment and keeper of wealth: More and more people realized inflation is real and asset like watches can be a good hedge. It also during the pandemic, that Rolex/PP/RM prices surged to an unprecedented level. There is just too much liquidity injected, but unfortunately was disproportionately distributed. At the same time we realized because unlike most other asset classes, watch can be worn and flaunt. But what really appeals the masses is that sustained value increment, which ultimately convinced most people to park their cash into watches.
– Dominance by a handful of brands: We have this situation of people flocking to the “blue chip” watches, the sports Rolex, PP etc. Other brands have to cut back on the production so as not to oversupply the market preventing the over inventories. This is evident of the sales figures Rolex/Tudor now surpass Swatch group as the largest watch company.
What’s likely to happen?
Supply of watches are not going to be increase until next year, COVID already disrupted the production and the supply chain. Prices are likely to be more volatile as on social media exert its influence and watches are now subjected to speculations. Speculation is evident as some Daytona models surged 20-40% within 2 weeks prior to the release of 2021 models on April 7th.
Trend towards precious metal is likely to continue as long as prices for steel Rolex/PP remain sky high. There are still many collectors flush with cash and waiting to purchase and sports model. High premium in steel models is a huge turn off for them; Gold watch sports model can be a good alternative, from the value stand point.
It is also common to see individual increasing the amount cash park in watches as asset. Nowadays it is likely to hear collectors claiming that they hold 5-10x more value in watches, as compare to a decade ago. This possible due to the sheer cost of watches nowadays; and at the same time, average number of watches in an individual’s collections also increased. This shift can only be attributed to everyone faith’s in Rolex, RM or PP ability to hold value and beating the inflation.
However, everyone will still have to be mindful during each purchase. Also do watch out for illiquid watches being bundle with you key purchase. Sometimes it is more worthwhile to pay premium rather than having a fortune stucked in unsellable pieces.
Key Brands:
Rolex: The 2021 Novelties are somewhat disappointing. Downsizing the Explorer, in our humble opinion, is a key move to capture the ladies market rather than that of a purist approach. More and more women are spotted wearing the professional Rolex models and this huge market that none of the major Brands can ignore. As for the overall grey market price trend it will be stable. But models like GMT or Submariner might increase slightly as they become good alternatives to Daytona, which can now be a little unassailable now. Demand for full gold watch models are also on the increase as we loathed the stainless steel pricing.
Patek Phillipe: the discontinuation of Nautilus 5711/1A-010 (blue dial) and replacing by the final year run of 5711/1A-014 (green dial) this spring is a notable development. Surely Patek Philippe is having a problem; they don’t want Nautilus to overshadow the entire brand, like how Royal Oak had became greater than the brand itself. Curiously, Patek Phillipe is choosing to end the 5711 reference by 2022, the 50th anniversary of the AP Royal Oak (RO). The rival already announced an anniversary RO “Jumbo” model will be dish out next year. Curiously, PP’s decision to pull out their very own “Jumbo” model, will means they are gracious to allow AP to have a free hand to this segment of the market. PP perhaps have intent to relanuch a newer model for the Jumbo Nautilus (6711?) next year or perhaps they are looking to upsize the entire Nautilus collection to likes of 5980, 5990 or 5726.
What we ought to do?
The strong demand for watches is set to slow down somewhat, but we do not expect the price to fall badly. But as the pandemic prolonged, consumers with deep pockets will still continue to spend on luxury and asset like watches as safe-haven.
Although we are still preaching on having a healthy cash position, but the same time we are on the lookout for good value investments like the undervalue 5digits Rolex models. The 5digits are defensive play: These contemporary Rolex are the “floor” of the sports Rolex, or we call them the entry level models and the price are stable and move up steadily. Complicated Patek Phillipe watches seem good value against the against the Rolex/PP sports watches, it can be a good alternatives for wearer. They are overlooked and there are gems waiting to be uncovered.
While we do not see an imminent fall in prices of Rolex & Patek Phillipe sports watches, but we always feel they are fully priced and upside will be limited. Till today this fear had proven to be unfounded. However, we should always adopt “enter at your own risk” approach. We too must prepare for price volatility, as news or rumor of discontinued of certain sports Rolex will surely weigh in on the prices.
For investment over a mid – longer term horizon, we might want to look at contemporary (discon) PP Nautilus models like 3710, 3700, 3711, 3712 etc, despite of current pricing, they yet to achieve the valuations that they deserved.
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