Sotheby’s (BID) stock dropped almost 12% today just on the heals of a $198 million auction for Damien Hirst’s art earlier this week. This was a record sale for an auction by a single artist according to Sotheby’s. The auction total was much higher than any of the expectations I saw published.
So what’s with the steep stock price decline today? Mr. Market is simply freaking out. Fear, panic and forced selling appears to be irrationally hammering the stock of this world class wide moat company. The bankruptcy of Lehman Brothers (LEH) and the government bailout of AIG (AIG) this week have caused world financial markets to go into panic mode.
Back in May, I first added Sotheby’s to the Fat Pitch Financials Portfolio at $24.55. Back then I wrote, “If I’m a bit too early, I still have sufficient cash reserves to buy additional shares at an even lower price.” Today I decided to take advantage of that option by putting my cash to work. I doubled down on my position, picking up shares at just $20.75 a piece. I just can’t believe that I can pick up shares of this profitable wide moat company at a P/E of just above 8. Somebody pinch me, I must be dreaming.
Yes, there is the danger that the turmoil in the financial markets will impact the very wealth and potentially reduce demand for fine art. However, the financial market declines might also drive more art collectors and investors to sell their peices in order to raise cash. More transactions equals more commissions for Sotheby’s.
Now that fear is really starting to take hold, I’m greedily eyeballing several high quality stocks. Thankfully, the Fat Pitch Financials Port is still 21% in cash. I might add new positions soon and I will likely double down on a few more of my current favorites.
Disclosure: I own shares of Sotheby’s.