Today I added shares of art auction house Sotheby’s (BID) to the Fat Pitch Financials Portfolio. The shares were purchased earlier this morning for an average price of $24.55. As is typical with any new purchase, shares of Sotheby’s dropped further today to a low of $23.75. It always seems like a little pain is needed before gains can be had.
Regardless, I am very excited about this purchase. It is very rare to be able to pick up shares in monopolies or duopolies for such a low multiple. Even though there may be a bubble in the modern art market according to some reports that I’ve read, other art sectors haven’t seen as much appreciation. Even if the modern art bubble deflates, art collectors will continue to use art auctions in the future regardless of current art prices. The choice typically comes down to either Sotheby’s or Christie’s when selling major works of art. I like those type of odds. Basically, Sotheby’s is a toll both on the road to obtaining fine art.
I expect that Sotheby’s may get a bit cheaper if this housing led recession starts to impact the super wealthy. However, unless things get much much worse, it is unlikely that the wealthiest, with their multiple income streams, will be sufficiently impacted by the economy to curtail their purchases of fine art and collectibles. If I’m a bit too early, I still have sufficient cash reserves to buy additional shares at an even lower price.
Disclosure: I own shares of Sotheby’s.