From time to time, I get sucked into some bizarre niche topic on the internet, and it sparks an insatiable curiosity. Recently I stumbled into a world of watches. What I discovered is fascinating. It is similar to the world of fine art, but I’d say a little bit more accessible and easier to understand. In the true fashion of trying to find an alternative investment, watches might have potential. However, I have to say; it is much more difficult than buying any other investment from a research perspective. Quick disclaimer, I am not an expert by any means, so in trying to answer is watch a good investment, I will turn to data and review various sources for further research.
Watches that appreciate in value
Originally, what drew me to this fascinating world is this article.
I started researching Rolex Daytonas to see if I could even buy one and quickly realized that it will be absurd to spend that much money on a watch. I imagine what my returns would be if I invested $35,000 (Price I was looking at the time) in stocks or even a lazy portfolio.
But if I look at historical price appreciation of similar watches the results are staggering.
Obviously, this is cherry-picking the most popular watch on the market at the moment. However, if you were to buy a used Daytona for $10,000 in 2010, you could sell it for $35,000 in 2021 or 3.5x in 2021. Using our simplified CAGR Calculator that is the compound annual growth rate of 12%
Compare that to a $10,000 investment in S&P500 ETF – SPY.
SPY produced a CAGR of 14.7% over the same period. Yes, it is higher, but that is during the biggest bull market run in history. Not bad Rolex Daytona, not bad at all.
Rolex watches in general
This made me curious, what about other, more accessible Rolex watches? Have they increased in value as well over the years? Daytona has a cool story behind it that made it very valuable to collectors, but what about the most “mundane” (if I can call it that) Rolex watch, the Datejust. With the Datejust, you don’t need to know the trends of a particular reference number or predict collector appetite in the future. It is much easier to acquire. Let’s take a look.
Here is the stainless steel Datejust price history I found from 2017 to 2021:
Just under $9,000 in 2017 to $13,000 in 2021. 1.4x over the period. Not as impressive as the Daytona, but not bad for a watch that is a lot easier to get. What’s great is that you can wear the watch for four years and then sell it for a profit.
Daytonas increased in value because a famous person made the watch famous. With a watch like Datejust, it just appreciated in value.
Another famous but more or less attainable Rolex is the Explorer. Look at its steady appreciation over the last ten years.
Omega Speedmaster Moonwatch
Another popular watch with a rather cool story is the Omega Speedmaster Moonwatch. What makes the watch special is that it has close ties to NASA. It was worn by many astronauts on various space missions, most notably Buzz Aldrin during the Apollo 11 mission to the moon. Models now carry the inscription: “The First Watch Worn on the Moon”.
This particular reference number more than doubled in value over the last ten years.
Patek Philippe Nautilus Ref. 5711
This particular watch is the world’s most desirable steel watch. How desirable? Check out this video of Kevin O’Leary crying when he was finally able to purchase one.
He was able to buy it at the retail price of around $30,000. However, he can immediately turn around and sell it for $80,000 if not more on the secondary market.
To quote O’Leary:
Nothing brings a tear to my eye like making money. Technically, I just made 50,000 smackeroos!
Here is the astonishing Patek Philippe Nautilus historical price chart from Chrono24.
They were basically selling at their retail price of $30,000 in 2013 with a modest increase in value until sometime in 2018, when they took off and now can sell for nearly $120,000.
That is almost 4x your investment, definitely killing the stock market returns over the same period.
Why did these watches go up in value?
Hard to say but over the last 10 years or so the watch market has gone bananas for steel sport watches from 3 brands: Patek Philippe, Rolex and Audemars Piguet.
The market in watches is not as objective as the market in stocks. There aren’t clear metrics like earnings or cashflows that can be applied to these pieces of jewellery. The price is artificially inflated by a group of collectors, auction houses, bloggers and whoever else carries influence in the industry.
Companies like Patek and Rolex are not producing more of these to meet demand. They do it on purpose to create a sense of exclusivity that only boasts demand further.
It is not necessarily a good thing for these brands however. If one watch is extremely sought after the clients walk into the store only looking for that watch are disappointed by the wait times and this creates an overall negative experience. One watch that casts such a big shadow, hides all the other watches from the light.
How much to invest in a watch?
There seems to be a price threshold for watches that can produce these abnormal returns. For a watch to generate a serious investment return, it must be desirable and hard to get a the same time and that alone commends a price premium.
If the trend continues for stainless steel sport watches from these brands than it is doubtful you can find a piece for less than $10,000.
Are there watches for less that could generate a good return, maybe, but they are hard to find unless you really know the industry in and out and can predict what the market will demand in the future.
Watches to invest in 2021 and beyond
Watches we mentioned before that have historically appreciated in value are still popular today. If you can buy them at retail prices, they are very likely to generate a decent return.
Predicting the future demand
To invest in a watch that is easier to access today that will go up in value in the future is much harder to do. You need to follow the trends and understand the industry in and out. Here are a few top notch sources that will help you stay up to date with the trends
Phillips Past Auctions
Take a look at what auctions are selling lately. Reference numbers that are popular and are sought after by collections
Then take the list of those watches over to Hodinkee for further research.
Hodinkee is a premier magazine/blog and an authority site in the watch industry. They will likely have an explanation for why a certain watch is trending right now and what to look for in a watch.
After you have narrowed down the list see how the watches have performed on Chrono24.com. Chrono24 is a global marketplace so you can see what these watches go for around the world as well as price history of similar models.
Other sites & sources to follow
My favourite Youtube channels on watches
Don’t invest in watches for the sake of a return
This goes without saying but investing in a watch, only for the sake of making a return is extremely risky. If you understand the industry very well, I doubt you are reading this article right now.
Is watch a good investment? Yes, but not to make money. Because if you buy a quality watch, you get to enjoy it and then sell it for potentially the same amount if not more. What other product can you enjoy for 5 or 10 years and then sell at a profit?
Here is Kevin O’Leary on the subject: