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Stocks S / Sotheby's Holdings, Inc.


Subject:  Re: BID: Sotheby an interesting rec, but . . . ? Date:  6/23/2008  11:42 PM
Author:  AESpot Number:  97 of 102

Hi Valu3buff,

Okay so I lied, I'm going to reply to it simply because if you put the time into your thoughts, I'm thankful people are willing to share them (and plus I have internet at home now, which helps immensely!) BTW, I pretty much agree with your thoughts and may have some random thoughts to add.

>> 1)...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.

It is. Subsequent articles (in other posts) have been indicating strong sales and records in new areas that are of interest to the Asian, Arab and Russian clientele. (For example, see the post re Diamond sales and how those demographics are broken out). I do think this will only continue as (1) people who have the money looks for items that retain a unique value, yet have the potential to be an investment, (2) offer an alternative investment to what's on the standard markets and (3) continues to provide enjoyment/value to people. People have been collectors of various things for centuries. I don't see this going away any time soon, especially with the strength of various sales that are occurring in this squirrely market.

>>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.

I'd actually agree with this. I think Christie's gets a lot of press attention and is known amongst the American crowd, but Sotheby's is pretty well known internationally and also has the exposure and data/intelligence to know when a given product line (i.e. items from a particular artist) are being more sought after. I think it should then, however, be understood that this is the type of company that one should know will always have a relatively higher inventory than would be "desired", but that may very well get priced into the stock.

>>2)...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 ... it would improve its balance sheet.

I agree. There are costs associated with carrying this inventory, and certainly risks. However, I have noticed just from looking at their auctions and their results, their ranges tend to be a little more conservative, and that a lot of the results have been exceeding their ranges. I actually like this conservative expectation and beat demand, versus having high hopes and being disappointed. It's more realistic, especially given the uncertainty in the current markets (both stock/financial and art).

>>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 pa