The secondhand watch market as a profitable investment.

 

Luxury watch investment is only emerging as a young, rather complicated and unpredictable business, which isn't that profitable if we’re to go by the standard metrics of modern financial management. What makes it an even more fascinating area is its intrinsic connection with the business of auctioneering, which, on the contrary, can be described as quite a profitable pursuit.

 

Of course, we shouldn't oversimplify expert evaluation services and other logistics, but they were fine-tuned a long time ago to run smoothly without any glitches. Watches have attracted phenomenal interest from investors, setting a series of extremely impressive records over the last six years.

 

An anonymous bidder via proxy at a Sotheby’s auction which took place in November 2014 paid USD 24,128,000 for the Patek Philippe Supercomplication pocket watch completed in 1932 for the American banker Henry Graves Jr. The watch has 24 complications, which means that the buyer paid one million dollars for each complication.

 

Patek Philippe Supercomplication pocket watch Henry Graves Jr., Hodinkee (c)
Patek Philippe Supercomplication pocket watch Henry Graves Jr., Hodinkee (c)
Patek Philippe Supercomplication pocket watch Henry Graves Jr., Hodinkee (c)
Patek Philippe Supercomplication pocket watch Henry Graves Jr., Hodinkee (c)

We shouldn't forget that the same watch went under the hammer of the same auction house for 11 million dollars back in 1999, i.e. this item has grown in value by 13 million over the last 15 years. In November 2016, a Patek Philippe chronograph wristwatch with a perpetual calendar from 1943 was sold at the Phillips auction in Geneva for CHF 11,020,000, or USD 11,112,020 according to the exchange rate at the time.

 

It didn't even have a gold case, but one made of stainless steel. Another stainless steel chronograph was auctioned off by Phillips in New York in October 2017, where the Rolex Daytona Ref. 6239 owned by American actor and racing driver Paul Newman fetched USD 17,752,500. This set a new world record for the most expensive wristwatch!

 

Then there was of course the wristwatch sold at the eight Only Watch auction a year and a half ago in 2019. The Patek Philippe Grandmaster Chime Ref. 6300A-010 in a stainless steel case was estimated at 2.5-3 million CHF and went for no less than 31 million CHF. This is how Patek Philippe regained the title as manufacturer of the world's most expensive wristwatch.

 

Patek Philippe Ref. 1518
Patek Philippe Ref. 1518
Patek Philippe Ref. 1518
Patek Philippe Ref. 1518

This would have been a simply unimaginable outcome not too long ago. Secondhand watch market heavyweights — Osvaldo Patrizzi who founded Antiquorum Auctioneers and Massimo Barracca who owns the best private collection of Patek Philippe timepieces — both like to look back at how they managed to snap up rare complicated pieces 25-odd years ago for USD 5,000 from sellers who were doing their best to conceal their grins, as ridiculous as it may sound today.

 

 

An anonymous bidder via proxy at a Sotheby’s auction which took place in November 2014 paid USD 24,128,000 for the Patek Philippe Supercomplication pocket watch Henry Graves Jr.

 

And they didn't acquire their best collection pieces in some country off the beaten path where no one knows anything about watches, but from boutiques in New York. However, prices for rare complicated watches have since become over a thousand times more expensive.

 

This is also somewhat due to the fact that luxury watches have begun to be seen as cultural elements, and haute horlogerie is now on par with fine art. The myth that investing in watches can return millions of dollars in profit does of course also have something to do with it. Collectors have begun keeping their identities strictly anonymous.

 

Paul Newman wearing his Rolex Daytona Reference 6239 (photo Douglas Kirkland Corbis via Getty Images)
Paul Newman wearing his Rolex Daytona Reference 6239 (photo Douglas Kirkland Corbis via Getty Images)
Rolex Daytona Ref. 6239
Rolex Daytona Ref. 6239

Watches now need to be kept hidden further from jealous prying eyes. Not only is it common for collectors to keep the name of the bank where their cherished watches are stored under wraps — even the country where the bank is located is kept secret. True connoisseurs of haute horlogerie say that having to keep the best collection pieces hidden away is the greatest shame but a necessary evil.

 

Overall, following the recent series of records set at auctions for investments in watches, even those who prefer investing in real estate have begun to seriously consider giving it a try. So what's the big deal? Prices for rare watches from the best watchmaking houses have long been at the same level as elite property.

 

When you look at the figures on price growth, it's easy to see that a successful investment in certain models from watchmakers with a well-thought-out auction strategy will return an average of 7-10 percent per annum (Patek Philippe, Vacheron Constantin, Rolex, Audemars Piguet, A. Lange & Söhne, F.P. Journe Invenit et Fecit).

 

 

Osvaldo Patrizzii, the founder of Antiquorum Auctioneers, and Massimo Barracca, the owner of the best private collection of Patek Philippe timepieces, like to look back at how they managed to snap up rare complicated pieces 25-odd years ago for USD 5,000 

 

Sure, the price of gold, masterpieces of the visual arts and real estate increases at a faster rate (we're talking about housing stock, not offices or retail space), but the watch game has its own advantages. For example, if a socio-political crisis of epic proportions were to unfold, you can't put real estate or a painting in your pocket and run with it.

 

That's why more and more people are trying to get in on the game in this market, especially in countries with a turbulent history and an uncertain future, which would include Russia, China and a number of other states. Complicated models by the best watch manufacturers have become harder to acquire in recent years. 

 

Patek Philippe Grandmaster Chime Ref. 6300A-010
Patek Philippe Grandmaster Chime Ref. 6300A-010
Patek Philippe Grandmaster Chime Ref. 6300A-010
Patek Philippe Grandmaster Chime Ref. 6300A-010

As a general rule, all of the most exclusive limited edition pieces are snapped up by lucky collectors long before the watch is even unveiled, as a solid return on these models is guaranteed. All everyone else can do is wait for their chance to successfully invest funds in watches on the secondhand market, at auctions to be more precise. Why are auctions the only place for investing?

 

That's because auctions are the invention of brilliant minds. It’s where the magic happens, where secondhand items which would normally become less valuable over time according to all reason, miraculously become thousands of times more expensive, as if by magic. And that’s because auctioneers have learned how to transform old stuff into artistic masterpieces, sell them with masterful skill, and earn a tidy living for themselves in the process.

 

What Do Watch Collectors Invest In?

 

It probably goes without saying that watches on the secondhand market are valued first and foremost based on who manufactured them, and these watchmakers implement active auction strategies: they monitor the fate of models put up for auction, get involved in the bidding, and often buy watches themselves for record prices. These spending sprees occasionally pay off as effective marketing tools.

 

Watch manufacturers' auction strategies are not to be confused with the artificial scarcity marketing strategies implemented by a number of watchmakers. For example, a brand new stainless steel A. Lange & Söhne Odysseus watch officially priced at EUR 28,800 was sold for USD 81 900 a month ago — a first in the company's official history.

 

This only goes to show that someone wanted this watch so badly that they were willing to shell out almost double for it — anything to avoid being put on the waiting list. That's all there is to it. There's a similar level of demand for some of the stainless steel models by Rolex and Patek Philippe, but there’s still no guarantee that this investment will pay off in ten years' time. 

 

A. Lange & Söhne Odysseus Steel
A. Lange & Söhne Odysseus Steel
A. Lange & Söhne Odysseus Steel
A. Lange & Söhne Odysseus Steel

These watches also need to be in good condition and have the watch box, certificate of origin and other papers to confirm their authenticity. You should also check whether the watch has been restored. Any serious manufacture has its own service centers or affiliate workshops, but a history of having restoration work done can significantly lower the price on a watch.

 

And if the general experience of recent years is anything to go by, the only watches that fetch good money are the ones in a condition which experts grade as "Exceptional". Apart from "Exceptional" watches, the other four gradings on the 5-point scale currently used for assessing the condition a watch is in are "Excellent", "Very Good", "Good" and "Fair". Watches with lower gradings aren't approved for sale at auction.

 

Uniqueness

 

The number-one thing that experts and collectors are looking out for is a watch that's rare. The one-off model commissioned by the American millionaire Henry Graves which Patek Philippe began working to create in the early 1920s held onto its title as the most expensive watch for more than half a century. Moreover, the Henry Graves Supercomplication is known as the Mona Lisa of the watch world. It should be emphasized that investors highly value the given promise, if it is truly indestructible.

 

F.P. Journe Astronomic Blue, The Only Watch-2019
F.P. Journe Astronomic Blue, The Only Watch-2019
Audemars Piguet Code 11.59 Tourbillon Openworked two-tone, The Only Watch-2019
Audemars Piguet Code 11.59 Tourbillon Openworked two-tone, The Only Watch-2019

For example, they implicitly trust to House Patek Philippe, which, having once publicly promised not to reissue a unique piece of its authorship, will never compromise its principles. Same time many will remember is that of the company Omega, which caved in response to multiple requests from fans to reissue models from originally strictly limited series, such as the watch dedicated to the victories of Formula One legend and brand ambassador Michael Schumacher.

 

Clear "bloodline"

 

This is less about the watches and more about their owners. Sometimes the name of a watch's previous owner can significantly boost its price on the secondhand market. Take the Rolex Daytona Ref. 6239 chronograph in its scratched stainless steal case as an example, which was a record holder for two years, all thanks to the fact that it had been worn by Paul Newman. Napoleon Bonaparte's Breguet, Lawrence of Arabia's Patek Philippe, and Marilyn Monroe's Cartier Tank are all safe investments.

 

Sometimes these watches have helped their owners make great things happen: the Longines watch Charles Lindbergh used to time the first solo non-stop transatlantic flight; the "Sturmanskie" watch from the First Moscow Watch Company worn by Yuri Gagarin on his journey into outer space; and the Omega Speedmaster worn by Neil Armstrong as his took his first step on the moon.

 

By the way the price of US President Dwight D. Eisenhower's gold Rolex Oyster failed to reach the million mark

 

However, even in these instances, it's impossible to predict how the public will react. For example, the price of US President Dwight D. Eisenhower's gold Rolex Oyster failed to reach the million mark. At the last auction in December, the same stainless steel "Big Red" Daytona chronograph first worn by Paul Newman before he gifted it to his daughter was sold for "just" USD 5,475,000. The Heuer Monaco model that made a star appearance on Steve McQueen's wrist also failed to meet the expectations, which went for USD 2,208,000.

 

Rolex Datejust worn by Dwight D. Eisenhower, 34th President of the USA
Rolex Datejust worn by Dwight D. Eisenhower, 34th President of the USA
Rolex Datejust worn by Dwight D. Eisenhower, 34th President of the USA
Rolex Datejust worn by Dwight D. Eisenhower, 34th President of the USA

Sure, this wasn't a bad hammer price for Heuer, and it even set a world record, but the watch was expected to achieve greater heights considering the 17 million Paul Newman's watch had fetched three years earlier. In general, it's impossible to predict how these names will work their magic, and that's what makes it magic. 

 

Watches that are both unique and have had a famous owner have a very high resale value. Take watches commissioned by emperors for themselves and their wives, or by the Maharaja as examples. One day, the unique Vacheron Constantin Atelier Cabinotiers Vladimir minute repeater with a tourbillon will resurface at an auction and set a new record, which has its own specially created one-of-a-kind complication called Birthday Chime that sounds once a year on October 7.  

 

 

Rareness

 

Strange as it may seem, the only watches that can compete with unique pieces are ones that were originally produced as part of a series of models but have become unique over time. For example, one of the the white-gold Patek Philippe Calatrava Officier modesl, made during the period when watches were making the transition from pocket to wrist.

 

This watch gets its name from its original hinged officer's caseback, which can be opened to reveal the transparent glass dust cover protecting the movement. This is the "Holy Grail" for all respected collectors. They’re searching high and low for one in all four corners of the world, as this model isn't even in the Patek Philippe Museum.

 

 

Patek Philippe Calatrava officer’s watch Ref. 5153 (edition 2009)
Patek Philippe Calatrava officer’s watch Ref. 5153 (edition 2009)
Patek Philippe Calatrava officer’s watch Ref. 5153 (edition 2009)
Patek Philippe Calatrava officer’s watch Ref. 5153 (edition 2009)

 

According to the owner of one of the largest private watch collections, if one of these white-gold "Officers" were to turn up at an auction in the near future, it would set a new world record there and then, as there are bound to be bidders willing to offer at least 50 million dollars for the piece. The same fate can be expected with similar predictions for the platinum Patek Philippe Perpetual Calendar from 1901 in the style of Art Nouveau.

 

History

 

When buying a watch, you can only justify sacrificing appearance for a notoriously rare piece that marked the advent of a new era in watchmaking. An example would be the first wristwatch chronometers produced by Girard-Perregaux that were ordered by Kaiser Wilhelm I for his naval officers at the end of the 19th century, or the world's first waterproof Oyster watches produced by Rolex. Masterpieces made by the legends of watchmaking during the period when watches were making the great transition from pocket to wrist are highly valued.

 

Foresight

 

Foresight is also an ultimately deciding factor which determines whether or not an investment is a success, as was the case with Richard Mille's success story. It all started with the lively auction of original watches housing standard ETA movements which had been substantially modified for design purposes, priced at 5000 CHF. Mille achieved the current average auction price of 350,000 CHF in just 3-4 years.

 

Petermann-Bedat 1967 Deadbeat Second
Petermann-Bedat 1967 Deadbeat Second
Petermann-Bedat 1967 Deadbeat Second
Petermann-Bedat 1967 Deadbeat Second

We put together our list of the best young watchmakers for a good reason, whose names are revelations in the world of watches. Back in the fall, their watches were being snatched up for 20 thousand. But the addition of these new names to the list of nominees for the Grand Prix d’Horlogerie de Genève (GPHG) has already affected watch prices.

 

That's not to mention Florian Bédat and Gaël Petermann, whose Petermann Bédat Dead Beat model was awarded the GPHG 2020 Horological Revelation Prize at the end of last November.

 

Knowledge is Power

And finally, you can make a profit if you have some relatively unknown, exclusive or at times secret information. Read watch magazines, catalogs and books, and talk to luxury watch specialists and experts. Even the tiniest of side notes in a lengthy news report can generate a sizable profit for someone who's able to draw the right conclusions from the information they've absorbed.

 

Sometimes just having a good relationship with a watch dealer, watch owner or even a salesperson in a watch store can also be useful. For instance, this person can tell you if they've placed an order for a watch from a Swiss company that was canceled because the model has been discontinued. A discontinued complicated model acquired in time is worth a lot of money!

 

The last piece of advice for investors watching the "watch exchange" can be summed up with the well-known saying "less is more". Remember that investing money in watches isn't a game of roulette, where the more numbers you cover, the less risk you have of losing.