The economic losses caused by the coronavirus are enormous. This is evident not only from the share prices, but also when you look at the number of companies that have fallen into bankruptcy. But gold is not everything now: Read on and find out why it’s currently a good choice to invest in a watch.
Watches as an investment – a sensible choice in times of a crisis
We are in a downward spiral
The global lockdowns resulting from the coronavirus pandemic have caused losses that have had a significant impact, particularly on the economy. While the DAX closed at a record high of 13,789.00 points on February 19, 2020, the index was down to just 8,441.71 points around a month later, on March 18, 2020. This is a drop of around 40 percent. During this period, the US Dow Jones Industrial Average index and the Japanese Nikkei 225 index also fell.
This development is hardly surprising: in a time when the future of business is uncertain, both entrepreneurs and investors tend to be more cautious with investments. And forecasts indicate that this situation will continue for some time to come. Against this backdrop, investors are strongly encouraged to review their own portfolio to ensure that it is crisis-proof. A certain stability can initially be observed in the usual suspects such as gold and real estate: Since the economic slump, gold has gained around a third in value.
One more investment to have on your radar in a luxury watch. In recent weeks it has become clear that the feared collapses in price stability are not occurring. We’ve compiled a list of good reasons why watches are worth an investment even in times of crisis.
1) Watches are a safe investment
Several factors are likely to underlie the price stability of watches. First of all, it is important to note that not all watches serve as investments. Those who want to focus on value stability or growth should invest primarily in classics and/or sought-after models. As a rule, these are sporty steel models of traditional luxury brands.
With regard to the sought-after references, the probably most decisive aspect for the high price stability is the significant discrepancy between supply and demand: While watch manufacturers can only produce a limited number of their offered watches - and consequently a limited number of certain models – the limited supply is opposed by an ever increasing demand. It is not possible to determine the exact supply-demand ratio, but the waiting times, which can be years, and the waiting lists that have already been closed, are a sure sign that demand is exceeding supply. Even if one third of buyers drop out as a result of economic instability, demand still exceeds supply.
In addition, luxury watches are perpetual classics without an expiry date. The famous saying of the traditional manufacturer Patek Philippe, that a luxury watch never belongs to you alone, but is kept for the next generation, hits the mark. The purchase of a watch in the high price segment is a special, emotional occasion that is completely detached from everyday purchases and investments. Whether one has the high purchase price to spare or saves for years: when a purchase opportunity arises, only very few watch enthusiasts turn it down.
2) The watch industry can react flexibly to crises
Another reason for the suitability of watches as an investment is the watch industry's responsiveness to crises. In recent months, it has been possible to observe how quickly sales structures have been changed and events prepared for the long term have been postponed and converted: When the retail trade was drastically reduced, some manufacturers set up online shops within a short time, according to H. Moser & Cie, or allowed concessionaires to sell their watches online like Patek Philippe. The watch industry also reacted quickly and confidently to the cancelled watch fairs in spring.
The reason is obvious: the watch industry is small – and partly owner-managed. Necessary decisions can therefore be made without bureaucracy and without detours, which in turn shortens the reaction time enormously. Thanks to this flexibility, the watch industry is likely to have absorbed part of the loss in turnover.
3) Investment also supports the watch industry!
If you’re passionate about the product, you should support the manufacturer. This is especially true in times of crisis. Above all, the preservation of the watch industry seems desirable: watchmaking is a centuries-old craft that must be preserved at all costs. Some of the skills associated with watchmaking - such as enamelling - are already threatened with extinction. In addition, the Swiss watch industry is fair and bound to its home country.
It is also a widespread misconception that the promotion of watches as an investment does not benefit the watch industry. After all, by maintaining the high demand for individual flagship models also works in favour for the manufacturer as well.
4) Stable value: Rolex Daytona Ref. 6239 and AP Royal Oak Ref. 15202ST
The value stability – even in times of crisis – is particularly evident in two specific models.
Rolex Daytona – Reference 6239
The Rolex Daytona Ref. 6239 came onto the market in the 1960s and cost around USD 200. Today, the Ref. 6239 costs at least 60,000 Euros, depending on its condition. The reason for this enormous increase in value is complex: On one hand, the Daytona used to be a slow seller, as unlike its competitors, it did not yet have an automatic winding mechanism. For this reason, the selection, which is already limited for well-preserved vintage models anyway, is very limited. On the other hand, the watch became an icon through Paul Newman. Newman's personal Daytona was auctioned for over 17 million USD at Philips in October 2017 and went down in history.
Audemars Piguet Royal Oak – Reference 15202ST
The Audemars Piguet Royal Oak Ref. 15202ST is just as stable in value, but for completely different reasons: Unlike the Rolex Ref. 6239, Audemars Piguet's Ref. 15202ST is a contemporary watch that has been in production since 2012. The special feature of this reference is that it is modelled on the original Royal Oak from 1972 (Ref. 5402), with its proportions and detailed design features. For enthusiasts and connoisseurs, Ref. 15202ST is therefore the most desirable model in the Royal Oak collection. While the list price for the watch, which is sold exclusively through AP boutiques, has now reached 26,000 Euros, the market price has exceeded the 40,000 Euro limit. The reason is quite simple: demand is significantly higher than supply - and Royal Oak is a legend. Should Audemars Piguet at some point stop producing the Ref. 15202ST, prices will explode. A scenario that underlines the suitability of watches as an investment.
