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The Wheels Haven’t Fallen Off These Investments

By: Peter Volny
May 2010

At a time when owning stocks has become anathema, there exists an investment opportunity that actually combines capital appreciation with intense pleasure and considerable excitement. In most cases it affords membership to exclusive clubs with like-minded members, who often want to buy your investment.

Wheel Investments

Let’s face it, when was the last time you walked into your office, den, or financial advisor’s premises and lovingly stroked your stock certificates? Or compared their sensuous flowing lines with other investments as you watched their value increase?

Passion; beauty; excitement; competition; high performance; prestige; exclusivity; special events; opportunity to meet like-minded aficionados – these are not words you typically associate with investments. How do you put a value on any of them individually let alone combined?

Wheel InvestmentsFluctuating Wildly

You certainly don’t get those qualities with owning Microsoft or Google stock, and definitely not with GM stock. Plus, you don’t have to fret over your investment fluctuating wildly on a daily basis. And let’s not forget that Microsoft or Google can always issue more stock, which devalues yours.

However, they’re not building 250GTO Ferraris or Shelby Daytona Coupes or 1964 Pontiac GTOs any more.

Now don’t make the mistake of thinking that this is a profitable hobby just for the billionaires. In fact, there are collector cars in every imaginable category and in every price range from a few thousand dollars to $10 million plus.

So how do you go about this type of investing? Well just as in traditional stock market investing, there are two ways – you can do it yourself or you can hire an advisor. Either way the best place to start is by actually attending a few auctions, watching the action, walking about and examining the cars, and talking to the many true experts who are always only too happy to offer advice.

Unlike stocks and bonds, which you buy purely in the belief that they will appreciate in value, collector cars should be acquired because of the attraction they hold specifically for you. Perhaps it’s their beauty, performance, or memories of youth.

Wheel InvestmentsRM Auctions, a Canadian company based in the hamlet of Blenheim, ON, a three-hour drive west of Toronto, is considered by many to be the world leader in collector car auctions. Proof can be said to lie in the fact that the undisputed pinnacle of high performance cars, Ferrari, retains RM to conduct auctions for them on their own hallowed premises.

RM has 10 insider tips for classic car investing which they’ll gladly send to you, but they can be summed up in three words – desirability, conditions, rarity. There’s also no doubt that ‘provenance’ plays an enormous role. Provenance is a combination of history and originality.

Which inevitably brings us to the Ferrari 250GTO – arguably the most famous and valuable car ever built. In fact, if you Google Ferrari 250 GTO there are more than 236,000 results.

In 1962, a brand new Ferrari 250 GTO, a race car you could also drive on the street, would have cost you US$18,000. A scant three years later in 1965, no longer truly competitive but still a wonderful car, one could be acquired for a mere US$15,000. However, there were only 36 total GTO examples made, and just last year one sold privately for a rumored US$28.5 million. That’s 190,000 per cent appreciation in 43 years which sure beats the TSX which returned a comparatively paltry 1,053 per cent.

On May 17, 2009 at the RM Auction at Ferrari’s Maranello headquarters, a legendary 1957 Ferrari 250 Testa Rossa smashed the auction world record at US$12.4 million. The list price new was US$12,000.

Another highly unique and desirable race car was offered for sale by Mecum Auctions at the prestigious Monterrey, CA, auction in August 2009, part of week-long festivities including the Pebble Beach Concours d’Elegance, where you are more than likely to bump into Jay Leno, an avid collector and aficionado, and, perhaps, a very remorseful Bob Bondurant.

The 1965 Shelby Daytona Coupe, one of only six ever built, was the first American car to win the coveted World Manufacturers Championship. Bob Bondurant, the famed American race driver, bought this particular one in 1968 for $4,000 and promptly sold it for $10,000, ecstatic at his good fortune and quick profit. At Monterrey it sold for an impressive US$7.25 million.

Wheel InvestmentsThe grand-daddy of all auction action is in January in Scottsdale, AZ, where up to 4,000 cars can come on the block, the majority at no reserve. No fewer than six auctions take place over 10 days including the world famous Barrett-Jackson event, which concentrates on American cars especially 60’s muscle cars. This one is as much car show as auction and draws a quarter of a million visitors over its week-long run. If you have any motor oil at all in your veins this is a spectacle not to be missed.

In 1993 Barrett-Jackson created a ‘mini-index’ of cars that represent the diversity of the collector car market spanning from 1957 to 1970. The cars in the index are the 1957 Thunderbird, 1967 Jaguar XKE, 1967 Shelby GT500, 1970 Camaro Z/28, 1970 AAR ’Cuda, 1965 Austin Healy MK III, and a 1967 Corvette 427/435.

The value of the cars in the mini-index grew by a compounded annual growth rate of 16 per cent from the first quarter of 1998 to same quarter in 2008, which included economic and political upheaval stemming from major events ranging from the Invasion of Iraq, the Dot Com bubble crash, and 9/11. During that same period, the Dow Jones Industrial Average (DJIA) grew a compounded five per cent annually while the S&P 500 Index grew four per cent. The price of gold grew a compounded 11 per cent in the same period.

Craig Jackson, Chairman and CEO of Barrett-Jackson, stated “Though most people buy a collector car to enjoy, they have also proven to be one of the soundest investment vehicles in the global marketplace over the past 10 years. It’s rare that a hobby and someone’s passion has the potential of being a great investment.”

Perfect Place

Scottsdale, because of its size, diversity and January timing, is regarded as the barometer of collector-car values, and a perfect place for winter weary Canadians to begin their adventure.

So what are you waiting for? Take some of that hard earned money and have some fun while it’s hopefully making even more for you.

Peter Volny owned an advertising and PR agency in Toronto, ON, which specialized in the automotive area.

To learn more about collector car auctions including dates of events the web sites below will get you started:

 

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