'Stock investments with 'no competition'? As a collector, you can still do better'
These stocks are exciting investors, but here's a better way you can invest with far more pleasure
Paul Fraser Collectibles, Wednesday 2 November 2011
In these times of economic turmoil, it isn't often that your hear words with such certainty - especially when discussing stocks:
"The firm has an almost impenetrable moat against competition."
This quote refers to a company whose stocks, many people believe*, will outperform the S&P 500 index going forward.
But which 'impenetrably protected' company could these people possibly be referring to?
Perhaps eBay? Or maybe Amazon?
Actually no. I'll give you some clues...
This company has been around since the mid-1700s.
It exists in a relatively small - but strong and growing - market. Its existing relations with this market are strong, to the extent that people regularly spend tens of millions with the company.
As a result, the firm currently turns around $300m annually. This should continue to grow by 5-7% year on year. And its cash/debt ratio is a very impressive $666.2m/$480.4m.
Actually, this company's stocks (with a cheapish P/E of 12.6) offer a 'discount alternative' to the likes of eBay and Amazon.
So what is this company's secret? Well, it sells items of the utmost rarity and exclusivity, quality and provenance that eBay and Amazon can only dream of...
This firm's inventory is what gives it an "impenetrable moat against competition". So who is it?
Look no further than... Sotheby's
There will always be rich people who want to buy collectibles.
That's why, in the words of the investment solutions website Monetary Fool, Sotheby's "four star stocks are set to pop."
Of course, I'm not here to recommend that you invest in Sotheby's shares. I mean, even the respected investor Peter Lynch once wrote:
"An investment is simply a gamble in which you've managed to tilt the odds in your favour."
But what if you could benefit from Sotheby's success without having to gamble with its shares?
And, better still, do it while enjoying yourself!
Let me explain by looking at why Sotheby's stock's are so appealing. As I said, it's largely down to the quality of their inventory...
"We have seen record various-owner sales of Contemporary Asian Art, 20th Century Chinese Art, Fine Chinese Paintings, Magnificent Jewels and Jadeite, Important Watches," said Kevin Ching, Chief Executive Officer of Sotheby's Asia earlier this year.
"In addition, records were set for Ming Porcelain, the Highest Price Per Carat for a Fancy Vivid Blue Diamond and a Fancy Vivid Orange Diamond, as well as for the key 20th Century artist Zao Wou-ki."
Great art and fine watches and jewellery. These sound a bit more exciting than stock investments, don't they?
Collecting these things can bring you huge pleasure and enjoyment (and could even be good for your health). But that's not all...
With stock investments, fortunes change and there are no assurances (again, I'm paraphrasing Peter Temple here).
But, with tangible assets like art, watches, jewellery and other collectibles... Well, here's what the mainstream financial press have said recently...
"With rare Chinese stamp prices up 44% pa since 2006, the Wall Street Journal reveals the country's philatelic investment potential"
"Hong Kong art auctions are defying the global economy, claims the Financial Times"
"Gallé glass is all the rage, but can it be a lucrative investment?" - The Financial Times
So, investors may be getting excited by the possible benefits of buying shares in Sotheby's...
But you can do better
To find out more about how you can benefit from investing in collectibles, view our special investment guide pages.
Or contact our experts for a free consultation at:
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Until next week,
* 94% of the 568 Monetary Foolwebsite members who rated Sotheby's believed the stock will outperform the S&P 500 going forward.
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