“Our chief want is someone who will inspire us to be what we know we could be.” Ralph Waldo Emerson
Assume for a moment that emerging artists are akin to value stocks. Like any true value stock, the work of emerging artists is often overlooked, and their worth and prospects underestimated. However, just as Warren Buffet will search out quality companies with distinctive attributes, art lovers can unearth emerging artists whose work is thoughtful, topical and passionately committed to a sense of relevance to modern life. And while the majority of investors fail to perceive value stocks’ improving prospects until after the greatest gains have already been made, the opportunity to discover the value of emerging artists exists now. A passionate storyboard artist Sydney has deep understanding on film.
The art market continues to expand at an unprecedented pace. 2007 marked the first time in history that total worldwide sales for Christie’s and Sotheby’s hit $10 billion. In November, Christie’s posted its second highest total for sales of Post-war and Contemporary art at $325 million, second that is to the $385 million tallied in May. Notably, 93% of the works sold, and a dozen artists set records. Meanwhile, Sotheby’s sold $316 million at its November sale of Contemporary Art, the highest auction total ever posted by the firm. Sotheby’s sold 91% of its lots.
CREATIVITY ENGENDERS CHANGE
Art is attracting a new breed of buyer. At Sotheby’s June sale of Contemporary Art, over 20% of buyers were participating for the first time. Around the world, young, urban and increasingly affluent professionals are choosing art as an accessible means by which to obtain a hallmark of their culture, while demonstrating their individuality and increasing their wealth.
The reasons for art’s broadening appeal are varied, but beyond the worldwide expansion of wealth, what’s taking place is a fundamental shift in the understanding that creativity engenders change. Whether it be municipal or county governments, educators, or art lovers, there is a new respect for the way that art and music inculcate culture, define generations, and influence the lexicon. When asked to characterize a decade, our responses most often include references to art and music. Art can and often does provide society with forward momentum.
Despite their unquestioned quality and finite inventory, sales results of the Old Masters haven’t kept pace with those of the Contemporary and Modern art markets. Even Contemporary furniture outsells older fare at sales and auctions. Growth in the value of Modern Art has outstripped every other category of art at auction. According to Art Market Research, prices for Contemporary Art have quadrupled since 1995 while results for Old Masters have significantly underperformed. For the period between June 2006 and June 2007, Old Masters posted gains of 7.6% vs. 44.3% for Modern Art and 55.3% for Contemporary Art, according to the Hiscox Art Market Research Index. And Sotheby’s sale of 304 lots during its sale of Old Masters in December, while yielding strong year-over-year results, nonetheless pale in comparison to Contemporary Art results.
Two economists at NYU’s Stern School of Business, Jiangping Mei and Michael Moses, have developed one of the most respected art indices. Their work centers around an examination of the auction results of over 11,000 sales transactions. Interestingly, in research reported in the magazine Registered Rep, they found that in over 4,500 cases it was not the most expensive paintings which provided the most return for investors, but those at the lower end of the pricing scale.
PROFIT POTENTIAL IS GREATEST AMONG EMERGING ARTISTS
As society grows more comfortable with the idea of art as a legitimate investment vehicle, the necessity of appropriately guaging the potential posed by emerging artists versus the few known, hot commodities increases. Emerging artists lack the price premium, and therefore the risk, of the more established, “growth” artists. Notwithstanding his works’ aesthetic appeal, the time to have bought Damien Hirst was when he was relatively unrecognized, or in investment parlance, when there was actually alpha relative to the art market.
Like any other inefficient market, the opportunity exists in the art market to realize outsized gains via active management of a portfolio. When it comes to value investments, the greatest gain is always realized by buying the stock whose price is the furthest below its intrinsic value. As a group, emerging artists fit squarely in the value camp, with equally strong prospects. Why assume that a tiny minority of artists, blessed with the impremateur of a small pool of art dealers, would produce the only art worthy of collectors attention and investment?
EMERGING ARTISTS CUT OUT THE MIDDLEMEN
A healthy byproduct of the clamor for art has been a movement toward a more direct-to-consumer experience among artists. In the past, an artist would often spend many years selling their work through galleries before gaining entry into the auction world. However, the current market allows many to bypass the high-cost (50% commission) gallery experience altogether as demand for their work pulls them directly to auction. There’s less of a need for a dealer or gallery owner to telegraph an artists’ worth, as intrinsic value virtually sells itself. As a result, lower commission rates paid by artists, and the ability to view work in an objective context both earlier and less expensively via the auction setting, creates a win-win for the artist and the art lover.
Copyright 2007 Capucine Price. All rights reserved.
Capucine Price is a former investment manager with a specialization in small capitalization value stocks, most recently with the Chicago-based investment firm William Blair & Co., LLC. She is the co-owner of the online art auction gallery CapucinesBoulevard.com. Inspired by Monet’s ‘Boulevard des Capucines’, the gallery is the best way to shop thousands of pieces of original artwork from talented artists worldwide through their art galleries online. Follow this article for emerging artists.
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