Warren Buffett who is often referred to as the Sage of Omaha, is considered the greatest investor of all time. He is notorious for being frugal, but he wears a yellow gold Rolex Day-Date, according to GQ and other publications. If Buffet chose to invest in horological instruments, he would most likely be buying vintage Rolex chronographs, quips Shery Zarnegin, an LA/Miami based jewelry designer turned watch auctioneer. Zarnegin cofounded Trading in Passion, Inc. dba Klockchain (www.klockchain.com), a tech-driven online watch auction which recently sold for an undisclosed amount, and according to sources “involved” luxury business wunderkind, Tom Ford.
Zarnegin, who had successfully 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 Klockchain watch auction platform that she developed with her team of industry experts and technologists, she learned important lessons about the watch market. The watch industry is distinct from the jewelry market where she was a creative force for years.
“Even brand driven jewelry is an accessory; its secondary market value does not fluctuate much and generally does not appreciate,” posits Zarnegin. Alternatively, luxury watch industry is often used to transfer value, and watches are often regarded as a hedge for inflation. Rolex, and in the last 20 years Patek Philipe and Audemars Piguet and smaller independent brands have proven that watches appreciate and can yield a formidable return, she points out. Newcomers to the collector space are independents such as F P Journe, Richard Mille, and MB&F. 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.” Warren Buffett knew what to put on his wrist.
Shery Zarnegin and her team at Klockchain cleverly deployed technology to streamline and authenticate watch transactions beyond the listing models of legacy watch selling sites such as chrono24, and legacy auction houses, including eBay, which finally incorporated certain failsafe features into its sales model, which is ultimately 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. According to New York Times, Alex Williams, “next-generation collectors see old timepieces not just as a stylish way to dress up a T-shirt and jeans, but also as a hot new asset in their investment portfolios”.
Also, in the event of an economic downturn, fine watches may turn out to represent a safe-haven asset, like metals or gems, or art for investors looking to diversify or hedge their portfolios.
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 points out 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 in strong brands limited editions may not mean much. 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. Both tend to focus on selling their own portfolios rather than curating a true investment collection.
London’s The Week explains, “with interest rates showing no signs of improving, 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.
Buffett is a value investor and his holding company, Berkshire Hathaway, avoids hype, volatile markets, and technologies that are ever so evolving. Instead, it has invested in powerhouse brands such as Coca Cola, Disney, Chevron, American Express, etc. In the same fashion, Buffett would likely be buying vintage Rolex (perhaps not Paul Newman Daytona watches, which are in overdrive demand just as Patek’s Nautilus line). My advice to watch investors is to do the same, says Zarnegin.
More likely, observes Zarnegin, the Sage of Omaha would be acquiring or taking an equity position in the brands/manufacturers themselves or the holding companies that own them. These might be independent giants such as Patek Philippe and Rolex or holding companies such as Swatch or Richemont.
According to a recent issue of Rolex magazine, Warren Buffett is a big fan of Rolex and has been wearing his Rolex Day-Date for many years. Buffett was once asked what he thought of Rolex as a company and if he would ever be interested in purchasing Rolex. Buffett responded by saying:
“Luxury watchmakers such as Geneva-based Rolex are great companies. They know my phone number, but they haven’t called.”
Leave a Comment