Vintage Watches Offer Opportunity Time And Again

The pocket watch brought into theA. Lange & Sohnefactory in Glashutte, Germany for an appraisal was originally described as a “scrap heap” because of its poor condition.

But the head designer for the German luxury watch maker was intrigued by the watch’s engravings and its intricate complications—mechanisms such as a perpetual calendar or chronograph that distinguish timepieces crafted by hand.

The designer spent eight years restoring the 1902 vintage watch, known as Grand Complication No. 42500, to its original condition. Its appraised value today: $2.7 million.

The owner of Grand Complication No. 42500 isn’t selling but it’s the break every watch collector dreams of: finding a rare timepiece that has increased tremendously in value.

“There are quite a few collectibles out there that are almost guaranteed to appreciate over time,’’ says Los Angeles-based watch distributor and collector Mark Kim.

Older watches have investment potential if they possess unique and still functional complications—intricate mechanisms like a perpetual calendar or extra dials like a second hand or timing function—are in scarce supply and were manufactured by a distinguished European watchmaker—preferably Swiss, German or French. They should also be in near-mint condition.

Luxury watches costing into the five figures fall into two broad categories: vintage and new/nearly new. As investments, collectors say the value is in vintage.

Eric Engh, who runs the retail site Old Watch, says the serious investors he works with include collectible watches along with commodities and rare cars in their portfolios of alternative investments.

While the wealthy may desire to own the latest Patek Phillipe or Rolex, he says true connoisseurs only buy vintage (circa 1970s or older) or antique (circa 1950s or older).

“New or nearly new is a fool's market,’’ Engh says. “With 175 manufacturers of luxury brands, the majority will not follow through as an investment.’’

Newer luxury models have been decimated by the rise of cell phones and the recession. Smart phones in particular have done away with the need to wear a wristwatch to tell time and provide the same cachet as a luxury timepiece, at least among younger buyers, says Engh.

Buyers Seek Exclusivity

“When you buy vintage, you’re very safe,’’ adds Francois-Henry Bennahmias, CEO of North America for Swiss watch maker Audemars Piguet. “More current watches have to be exclusive.’’

Bennahmias admits the financial crisis has hurt demand, especially for lower-end luxury watches—roughly $25,000 and below—and caused buyers to be more selective, but he still sees a vibrant market for unique timepieces that will appreciate over time.

A. Lange & Söhne U.S. brand president Gaetan Guillosson says buyers of new luxury models are demanding highly complicated watches with unique innovations that are available in limited editions of 250 or less.

The three watches in the current Homage to A. Lange Collection sold out at price points of $508,900 for the Tourbograph "Pour Le Merite," $171,800 for the Lange 1 Tourbillon is $171,800 and $24,500 for the 1815 Moonphase. Most Lange watches retail for between $25,000 and $90,000.

Audemars Piguet’s regular collection ranges from $35,000 to $40,000 yet demand for its 120-piece Millenary Carbon One Tourbillon chronograph that retails for $268,100 has also been strong.

New York watch collector Jon Bier believes men’s desire to wear watches as status symbols will keep the new and nearly-new market strong.

Bier, who is attracted to look and functionality over investment potential, says he’s profited from buying and selling watches from Breguet, Audemars Piguet and Panerai.

One-of-a-kind newer watches have been doing quite well at auction, confirms Douglas Escribano, a specialist for Christie's New York.

A Patek Philippe Reference 5016 from 1994 sold for $764,500 last December while Audemars Piguet Reference 25958 PT from 2002 fetched $350,500, both prices were well above estimates.

Auctions, Dealers Maintain Luxury Aftermarket

Extremely rare and historic watches are also sold by Christie's and other auction houses. Auctions help collectors by setting and publicizing prices for illiquid assets that are often difficult to value.

Most collectible watches change hands in what Detroit private dealer and enthusiast Dwight Zahringer describes as a “gray market” of dealer-to-dealer and dealer-to-consumer networks.

Zahringer says the key is to buy a watch at the right time—now is one of those times due to the financial crisis-induced slowdown—and have the patience to hold on for months or years to yield a good return.

Buyers can benefit greatly by purchasing scarce watches privately and then publicizing the purchase.

Engh once bought a watch for $31,000 then sold it a few years later for $100,000.

“Once a watch is sold it creates more demand and raises the price significantly,’’ he says, adding that the Internet helps in communicating sales.

Internet sites like ThePurists and the National Association of Watch and Clock Collectors have also made researching watches easier. Still, investors seeking watches should proceed with caution.

Experts say bargain prices for high-end timepieces are a warning sign of fraud. They recommend patronizing well-known dealers and researching them as much as the timepieces they are selling.

Luxury watchmakers are a good resource for tracking history and authenticity. A. Lange, which produces less than 1,000 watches per year, keeps a history of every watch they’re ever produced as well as a catalog of stolen watches.

The luxury-watch market is large enough to provide ample opportunities for would-be watch investors with realistic expectations.

“Any collectible's value is subject to change due to forces that may or may not be correlated with the economy,’’ says financial advisor and watch collector Barry Zimmerman. “[Collectors] have to understand that not all watches have the same liquidity and valuations can be very subjective.’’