How to Buy Wine Like Warren Buffett Buys Stocks

Thursday, May 14, 2009

"I call investing the greatest business in the world because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There's no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it." -Warren Buffett

Earlier this week, I published the wwpQPR- a formula for defining wine value. Today, I'd like to show an example of how the wwpQPR can be useful. I'll be applying it to the top value wines we've talked about lately here on the site in order to find the *top* of the top values.

Here are some of the wines I've highlighted as being extraordinary values. Let's plug each of these into the wwpQPR Calculator (a widget on the right hand side of the site) and see what we find. To use the wwpQRP in its simplest way, enter the numerical rating for "Quality" and the release price for "Price". If you do that while keeping the Baseline Quality and Baseline Price fields at their defaults of 90/$20 you should see the values in parenthesis for each of these wines. I've re-ordered them highest wwpQPR to lowest:

Now, the prices listed here are the "release" prices. The street price varies of course. Higher production wines tend to be available at warehouse clubs and can be had for quite a bit below release price. If I re-calculate these values depending on what I've been able to find these wines for in Massachusetts, I get:
Now, if I refine things a bit further to include my own personal ratings for these wines and again perform the calculations, I get:
Finally, if I change the Baseline Quality and Baseline Price of the wwpQPR to adjust for the peer group of each of these wines I can get a better feel for whether these wines are truly values. This part is a little tricky. It can be as simple as your gut instinct for what a typical outstanding bottle of wine costs in that category -or- you can be a little more precise with it by looking up in the Wine Spectator database the average cost of a 90-point bottle. For each of these wines, I'll enter as the Baseline Price for each of these wines according to its category and re-calculate the wwpQPR based on my ratings:
The 2006 Villa Pillo Toscana Borgoforte is an amazing value. If you go along with Spectator's 92 point rating, and generate a wwpQPR with a Baseline price of $38 (outstanding Tuscan red wine is pretty pricey) the result is a whopping 6.28: an Outstanding value.

Further reading:
  • Outstanding Pinot Noir is expensive. Here are some of my favorites under or around $20: The Hunt for $20 Pinot Noir
  • Malbec is a source of value. Here's one that was highly rated by the WSJ that Wine Spectator thought was pretty good too: WSJ Best Buy $10 Malbec 90 points for me- a wwpQPR of 2: Very good.
  • I don't think it's been rated by any of the major magazines yet, but this sub-$10 domestic Riesling is delicious and affordable. I gave it 93 points for a wwpQPR of 4.44: Outstanding.
  • Value wines aren't always cheap. I love the 2005 Cakebread Cabernet Sauvignon. I'd score it 93 points, and at around $65 a bottle, it's actually a good value if you consider $50 a baseline for outstanding Napa Cab. This wine would score 1.54: Good on the wwpQPR Calculator. You can read more about why I love Cakebread so much here.
Question of the Day: What's the single best value wine you've come across in the past year? I'd love to hear about it.


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