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Stocks S / Sotheby's Holdings, Inc.


Subject:  Re: BID: Sotheby an interesting rec, but . . . ? Date:  6/6/2008  12:27 AM
Author:  valu3buff Number:  90 of 102

Hi AESpot,

This is what I remember from the TMF recommendation, the Economist article and the balance sheet:

1) I'm not sure the article said who were the types doing bidding now, but like the recommendation, the Economist did attribute future optimism in the company to the emerging wealth from oil in Russia and the Middle East, as well as CHina for other reasons. Sotheby's is an attractive place for these people to put their new money because of its strong reputation as a market for Western goods.

2) Yes, while Sotheby's does face a risk from guarantees, the fact that they have had such a long history in this market means that it is more likely for Sotheby's to have an accurate value for a particular item while the potential buyers are incorrect than vice versa. Furthermore, since Sotheby's is able to mark down the value of a good that does not meet the guaranteed price to the highest bid, when the market corrects itself and Sotheby's is able to sell the good for its new price (which hopefully is higher and what it expected), it would improve its balance sheet. Which I believe is already very solid.

3) I believe they said in a conference call that Q1 is also the slowest quarter anyway. I don't know what "single-owner" sales have to do with anything, but your idea that it involves cash-strapped or otherwise disadvantaged parties sounds good to me.

Authentication: It sounds to me that you think the increasing difficulty in authenticated items is a disadvantage, while TMF (and I, fwiw) think it to Sotheby's great advantage. As one of the two most reputable brands in the world, isn't it easier for them to pass the costs along to their customers, i.e. "Sotheby's says so - it must be real", while at the same time making their services more valuable?

If I had cash set aside for opportunistic buys I would have jumped on this already (along with half a dozen others), not only for the reasons above but also because I like investing in American companies that are well poised to exploit overseas growth. Sotheby's sure seems to fit that definition - since when have rich folks not wanted to show off for each other?

hoping to be one of those rich folks, but on my sailboat in the South Pacific, not betting on vases.
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