In early November, Christie's auctioned off the most expensive art work ever, with a winning bid of $127 million. Including Christie's commission, the final sale price was $142 million. The entire auction raised $691.6 million, the highest amount ever at a single auction.
Buyers at these auctions are the very wealthy. The pieces command multimillion-dollar prices, and can mean tens of millions of dollars in commissions for the auction house.
And the demand for these high-end collectibles has been growing.
In 2000, the global art market was around $20 billion, according to The Economist. Last year, it was $50 billion.
Since 2003, The Economist's "Valuables Index" – a weighted index of prices for fine art, philately, numismatism, and other collectibles – has outperformed the "rich world" stock index MSCI World 211% to 147%, including dividends.
Owning such collectibles is expensive: not only in purchase price, but also in the additional costs like insurance, storage, and security. Furthermore, the market is notoriously opaque, functioning on handshakes and reputations. It is not for the faint of heart.
Even so, non-billionaires can make money in this exclusive preserve. And one company is the best stock – the only stock – to buy now.
Stocks to Buy: BIDding for Future Growth
The night after Christie's shattered records, rival Sotheby's (NYSE: BID), the venerable 269-year-old auction house, broke its own single-auction record. Its auction of contemporary art brought in $380.6 million, including a $105.4 million Warhol.
Sotheby's tops the list of stocks to buy to profit from the lifestyles of the rich and famous.
Like Christie's, Sotheby's makes its money helping the very wealthy pursue their passions. Sotheby's revenues come from commissions on auctions, interest on loans secured by artwork, licensing Sotheby's name to realtors, and sales of its own impressive inventory of art.
It is an expensive line of work, and a highly seasonal one, with major auctions happening in the second and fourth quarters. Sotheby's quarterly results reflect this trend, with peak earnings and revenue reported for those quarters, and, typically, losses for the first and third quarters.
That translates into uneven earnings reports. For the nine months ended Sept. 30, 2013, Sotheby's posted net income of $39.25 million on revenue of $514 million. For the same period in 2012, net income was $42 million on revenue of $477 million – a decline in profit margin from 8.8% to 7.6%.
Comparing the third quarters in 2012 and 2013, however, show a company that is working to improve its operating efficiency.