Aged Habanos Investment Return Study

[TheGipper]

Thought I’d share the results of a little study I did on the investment rate of return for aged Habanos.  This is based on some of the sales I’ve captured from the 24:24 aged sales since the beginning of the year.  The link to the spreadsheet is below.

https://docs.google.com/spreadsheets/d/1ienCsvzwOCOFRghYoKHoc3FfqNCpT1BQ5XhxlE-6TEA/

The average annualized ROI on various categories:
12.01%    Annualized Ret (all)
11.92%    Annualized Ret (Regular Production)
11.64%    Annualized Ret (Special Production)
12.85%    Annualized Ret (Discontinued)

Executive summary: For me, the return on investment is surprisingly disappointing.  For the clients of my investment advisor company, we have two core equity strategies that have a long track record of producing annualized returns of 14% (moderate) and 21% (active).  Both beat the average return on aged cigars rather easily.  And they do so without the overhead of storage/maintenance costs and risk of loss (beetles, etc).  (There is an argument that risk-adjusted returns, i.e. Sharpe Ratio returns may boost Habanos a bit, as stock market drawdowns in value during bear markets may exceed drawdowns in the value of a Habanos portfolio - but that's debatable and I don't have any reliable record of the Habanos "bear markets" we've seen that correspond somewhat with economic recessions.)

That said, there were some high flyers of individual boxes that had impressive returns:

Date    Box    Code    Price        Pur Date    Normalized D    Pur Price    Ann. Ret
1/20/2017    Saint Luis Rey Double Coronas 50    ULE AGO 14    $790.00        3/14/2014    5/1/2015    $454.00    37.84%
1/16/2017    Montecristo 520 EL    AME NOV 12    $540.00        2/19/2013    8/1/2013    $222.00    29.26%
2/20/2017    Montecristo 520 EL    GUT NOV 12    $540.00        1/23/2014    8/1/2013    $227.00    27.57%
5/25/2017    Cohiba Siglo II 5x5    MUO MAY 14    $294.00        8/19/2014    2/1/2015    $174.00    25.46%
2/20/2017    Vegas Robaina Unicos    LUB AGO 14    $279.00        12/23/2014    5/1/2015    $189.00    23.99%
5/25/2017    Cohiba Robusto (25)    MUO MAR 14    $456.00        7/13/2014    12/1/2014    $279.00    21.89%
7/13/2017    Cohiba Behike 54    BTO JUL 12    $630.00        11/24/2012    4/1/2013    $270.00    21.86%

I am not surprised the SLR DCs top the list.  But one could argue that finding a cab at $454 was very difficult in 2015.  However, most of the rest of these high flyers were readily available at the assumed purchase prices.

Some assumptions/issues that color these results:
1. The prices here aren’t the pie-in-the-sky numbers we see from the London auctions.  Different crowd, different presentation, different products, different (better!) provenance.  Personally, I prefer these numbers to the London auctions for various reasons, but primarily due to the fact that the prices here are fair to both buyer and seller.

2. Quality of individual boxes are ignored for this study.  Let’s assume it averages out, and everything here is certainly above average.

3. Historical prices were point-in-time prices from my own purchases and price lists I've kept for many years from various vendors, with some holes filled in via archive.org web snapshots.  But note that some boxes may have been hard to acquire at any price (ex: Partagas Serie du Connaisseur were always hard to find, even before discontinuation).

4. I normalized the purchase date for each box to be 9 months after the factory bode code date.  This obviously can vary, as sometimes you can get recent production stock that is older than that.  But I wanted to measure the rate of return for a regular holding period.

5. Multiple Habanos price hikes over the years are implied in this ROI analysis.  One might argue that is similar to inflation, since a replacement box of new production Cohiba is far more expensive than it was 5/10 years ago.  So it could be argued that the ROI on Cohiba on an "inflation adjusted basis" might even be worse than this study shows!

[Rocketman64]

Lots of work. Super analysis. Works for me.  Thank you.  

But...  wife, who s an MBA, is still not buying it...

 

I need something that appeals to my feminine half. 

[dangolf18]

Given the fact that prices are not normalized or consistent for aged stock, it'd be difficult to come up with a reliable ROR. For example, some are paying $800+ for a box of aged BHK 54, while Monte 520 are going for around $300-$350 the last time I checked. Cool exercise/study nonetheless. It's cool to think you could have made a 200-500% return for holding a box for 5-20 years lest us forget that if you had bought a stock like AAPL or GOOG 5-10 years ago, you'd have made 1,000+% return. 

[Head83]

Interesting study, there is a lot of time invested in this.  Out of curiosity, How many folks out there buy cigars as potential investments with the intent to sit on them for 10 years then look to sell?  I am sure those folks are out there but I don't have the will power!!  I use the logic of the investment argument when I reach deep into the wallet for an expensive cigar but I also know damn well, I will be smoking them and not selling.  I also use the argument with the wife but she knows it's BS.  What's the point to buy and store them if you don't smoke them to enjoy them?  You'd be better off investing in typical things like real estate or stocks to make real money. 

[canadianbeaver]

I will tell you my feelings about this, and I collect cigars for investment. My expectations are not all to match to glory of Behike 2010's purchased in that year. That was just a lovely bonus.

Current bank rates on saving accounts in Canada pay about 1.5% interest or so. The dough sits there and says, "Spend me!".

Collecting CC's is such a Blue chip, social and fascinating world for us.

Done and done.

[Miner]

It would be interesting to see the same breakdown in Aus $ terms. With a tax increase of 12.5% (on the weight of the tobacco) every year since 2013, you are guaranteed an increase every year on a private sale.

 

[BarryNY]

great analysis work on the aged stock...I figure on 10% avg compounded return for aged...

"For the clients of my investment advisor company, we have two core equity strategies that have a long track record of producing annualized returns of 14% (moderate) and 21%"

Wow a long track record with those numbers...not just 2009 to current? What's the name of the firm...Madoff & Co?  LOL.  Would love more info on getting involved with these strategies...

[Hedgehog]

I actually think the 12% returns are quite good and probably beat the majority of other collectibles.  It also handily beats the S&P 500 annualized return of 8-9%, including reinvested dividends, from 2003/2004 timeframe when the earliest boxes in the study were purchased. 

I think you might be spoiled by your 21% active strategy which is absurdly amazing if the track record is long enough.  More information on that please!  ?

 

 

[El Hoze]

Great stuff. My job is lending money to large junk-rated companies, and my background is accounting, applied math, and statistics so I overthink everything. One of the things I always say about buying a bond vs stocks is bonds have maturities. You don't (necessarily) need to sell them to the next highest bidder to realize a gain. Just buy them for less than they'll eventually be worth. The reason I mention this is I believe the hardest piece to factor in here is always the back end (ie selling them). Not only the frictional cost but the timing/illiquidity of cigars. It's not like selling a house or car or even wine. I don't think I will ever sell any cigar I own. Instead, I tell my wife the reason I buy 100s of cigars a month (despite only smoking dozens) is because I am cheap and smart with money. I have never done the math because I don't need to. Buying/hoarding boxes of cigars seems like a no brainer. Especially with less-supplied parts of the market. I am super cognizant of the time value of money and find having a large inventory of cigars an easy "investment" to fund, even though I won't ever sell any! I figured that was worth mentioning. 

I also agree that your return hurdle with equities seems high but what do I know I'm buying junk bonds at 6%! 

[NSXCIGAR]

I had estimated the appreciation of top regular production (Cohiba Robustos, for example) at about 10-20% per year (closer to 20% for El Laguito I'd assert) in this thread here:

However, ROI is a different matter entirely. In that same thread I estimated storage costs, transportation and/or shipping costs and auction or sale fees will bring your actual ROI to about 3-5% annually. When inflation is considered, there's very little actual profit to be made. I'd rather smoke them at that point. I'd gladly give up $50 profit to have a box of 10-year old Cohiba Robustos or Esplendidos I've aged myself. 

Now, special production, OTOH, is another matter. As I pointed out in this thread, cigars like Cohiba and Monte ELs, Gran Reservas and certain ERs (such as Edmundo Dantes, La Escepcion) perform much better than the most sought-after regular production. I think an astute investor with resources could do much better than 3-5% if picking some of these cigars which, if you know what to grab, doesn't have to be too difficult. The Dip Bushido and SP Eslavo are two recent examples that anyone who knows CCs well could see have huge investment potential. Of course, all the Gran Reservas have done very well in the secondary market. Cohiba ELs are always gold. 

[Fugu]

12 hours ago, TheGipper said:

beat the average return on aged cigars rather easily.  And they do so without the overhead of storage/maintenance costs and risk of loss (beetles, etc).

Main cause for loss: Undisciplined smoking-up.

12 hours ago, TheGipper said:

There is an argument that risk-adjusted returns, i.e. Sharpe Ratio returns may boost Habanos a bit, as stock market drawdowns in value during bear markets may exceed drawdowns in the value of a Habanos portfolio

Main and easy remedy for bear markets - Undisciplined smoking-up. 

[TheMonk]

Very interesting analysis, thanks for taking the time. I personally don't buy for investment purposes, but I do make it a point to be aware of a consistent resale value down the line... you never know if you're gonna need it!

[Head83]

How much would you expect a box to decrease if there were 1-2 sticks missing (cause whats the point of holding unless you try!)?  For sake of argument and to keep numbers easy we will assume a box of 20 sticks with 2 missing so 10%.  I imagine its not just an easy 10% decrease in value, could it be as much as 20% less than a full box that it would fetch on secondary market?  Is there any correlation to missing stick percentage to price when dealing with aged stock?

     

[joeypots]

While I think most of the prices listed in the examples are fine I suspect that the regular guy would have a hard time getting $540 for a box of MC 520 EL. Provenance and clientele are the key, Even though  the big European cigar sales are not counted here, I think that aged sales on this site can command a premium. The average guy with the same stock might not be able to get the same price. I've seen the 520s languish at $400 on cigars sites. Don't get me wrong, I appreciate the work you've done here. I think, though, that the market is illiquid and  it is difficult for the average person to capitalize  on aged Cuban cigars in general.

[PigFish]

Great analysis mate, thanks for sharing.

I have to wonder how the cigar market really breaks down, smoked verses collected and the motivations of the pool majority. I hate the 'collector' market when I view it from the shallow side of what I blame on collectors.

Speculators have always supplied liquidity. Perhaps the collector mindset has actually carried Tabacuba forward for the past decade. If cigars are being hoarded and not smoked, this does bolster my opinion about a general lack of production quality. There is certainly no need to make a great cigar if all the cigars are being bought and many are not being smoked and rated without 'speculator/collector' bias...

Ultimately I don't really care about the value of cigars. A good cigar is priceless... That is the reason why I bought them in the first place, to smoke them, and to profit from the experience and positive effects of enjoying a cigar. Yet when a box of mediocre cigars presses the threshold of 4 figures, even I begin to feel the itch to feed the fiery greed of the speculator and collector.

Good read Gip... -Piggy

[NSXCIGAR]

5 hours ago, Head83 said:

How much would you expect a box to decrease if there were 1-2 sticks missing (cause whats the point of holding unless you try!)?  For sake of argument and to keep numbers easy we will assume a box of 20 sticks with 2 missing so 10%.  I imagine its not just an easy 10% decrease in value, could it be as much as 20% less than a full box that it would fetch on secondary market?  Is there any correlation to missing stick percentage to price when dealing with aged stock?

Value could potentially decrease quite a bit. Once one cigar is missing value will always be substantially reduced disproportionately to the expected value of the intact box divided by the number of sticks. Depends on the cigar. If it's a very special production or humidor that is less likely to be broken and smoked, less than intact is a big issue. If it's something regular production or even general special production like a EL or ER then probably not as much. 

Basically, if there are sticks missing forget about making any money unless you've got something extremely rare like a partial box of 90s RA Coronas, Boli CE or Party Charlottes or something else from the 1980s or earlier.

5 hours ago, joeypots said:

While I think most of the prices listed in the examples are fine I suspect that the regular guy would have a hard time getting $540 for a box of MC 520 EL. Provenance and clientele are the key, Even though  the big European cigar sales are not counted here, I think that aged sales on this site can command a premium. The average guy with the same stock might not be able to get the same price. I've seen the 520s languish at $400 on cigars sites. Don't get me wrong, I appreciate the work you've done here. I think, though, that the market is illiquid and  it is difficult for the average person to capitalize  on aged Cuban cigars in general.

Monte 520 is a bit of an outlier as it's not that old and was a 10 box, and not as well-received upon initial release as the Sublimes, for example. I have no idea what the current market price is for them but I recall seeing them sell out at vendors for the high $300s. If you say they've languished at $400, I can't really doubt you but that would seem to be a pretty reasonable figure at this point, and I have heard of prices for these in the $500 range, although I have no confirmation of an actual sale.

And keep in mind that in 2012 all the ELs were much lower priced from HSA than they are now. I believe the Monte 520 was selling for $160-$180 a box at release. So even at $400, that would represent more than a doubling of price in 5 years which outperforms even the best regular production, and the ELs seem to do even better right through the 10 year mark. 

[joeypots]

So do you think anyone can get the same prices for aged cigars as an established vendor like our host?

[dangolf18]

1 hour ago, NSXCIGAR said:

Value could potentially decrease quite a bit. Once one cigar is missing value will always be substantially reduced disproportionately to the expected value of the intact box divided by the number of sticks. Depends on the cigar. If it's a very special production or humidor that is less likely to be broken and smoked, less than intact is a big issue. If it's something regular production or even general special production like a EL or ER then probably not as much. 

Basically, if there are sticks missing forget about making any money unless you've got something extremely rare like a partial box of 90s RA Coronas, Boli CE or Party Charlottes or something else from the 1980s or earlier.

Monte 520 is a bit of an outlier as it's not that old and was a 10 box, and not as well-received upon initial release as the Sublimes, for example. I have no idea what the current market price is for them but I recall seeing them sell out at vendors for the high $300s. If you say they've languished at $400, I can't really doubt you but that would seem to be a pretty reasonable figure at this point, and I have heard of prices for these in the $500 range, although I have no confirmation of an actual sale.

And keep in mind that in 2012 all the ELs were much lower priced from HSA than they are now. I believe the Monte 520 was selling for $160-$180 a box at release. So even at $400, that would represent more than a doubling of price in 5 years which outperforms even the best regular production, and the ELs seem to do even better right through the 10 year mark. 

I think they were released at closer to $220-$250 if I'm not mistaken. 

[nick2021]

41 minutes ago, dangolf18 said:

I think they were released at closer to $220-$250 if I'm not mistaken. 

135.50 euros depending on the country (not Cuba).

[puromaniac]

Nice study. Wish I had it back in 2012. This photo still haunts me for what I didn't buy.

 

[joeypots]

12 minutes ago, puromaniac said:

Nice study. Wish I had it back in 2012. This photo still haunts me for what I didn't buy.

 

And you can't smoke them, either. 

[jfire]

BTO 2013 coded CoRos sell for 600.00 a box now and sales were had for 285.00 a box U.S. during that year.... it a depends on what you buy to "invest" in.
Personally nothing I buy is to sell. But if I did I'd be buying REs that had lower price points that need time down and are not smoking well during their youth. Party898Vs, D4s Short Cabs. And nothing Cohiba right now.


Sent from my iPhone using Tapatalk

[Frozen North]

22 hours ago, BarryNY said:

great analysis work on the aged stock...I figure on 10% avg compounded return for aged...

"For the clients of my investment advisor company, we have two core equity strategies that have a long track record of producing annualized returns of 14% (moderate) and 21%"

Wow a long track record with those numbers...not just 2009 to current? What's the name of the firm...Madoff & Co?  LOL.  Would love more info on getting involved with these strategies...

Where do I sign up for either one of these?

[PartagasIV]

34 minutes ago, Frozen North said:

Where do I sign up for either one of these?

Give Jim Simons a call at Renaissance

[Lotusguy]

So do you think anyone can get the same prices for aged cigars as an established vendor like our host?

Nope. Though some stuff goes high on FB.