Should you Invest in a Rolex?

2020 has been an unpredictable year for Financial markets as the global economy has struggled through the uncertainty of a global health crisis.  For those anxiously watching their 401(k) fluctuations, time in quarantine has also helped lead to current and former Rolex owners watching the bullish secondary-market valuation push of steel sport models. Ask around and most watch collectors will share a regret of a piece they let go only to watch the value later skyrocket. Some have even suggested they should have just invested in Rolex models instead of broader financial markets.

Our musings about value trends can now be indulged with the excellent Watch Collection feature provided by Chrono24.  With this tool, we are able to benchmark valuations of difficult-to-obtain Rolex models.

DISCLOSURE: Before we go any further, we should mention that this comparison presented below is not financial advice. Instead, it is a look at how unpredictable markets have unfolded over the past few years. Watch investing can be perilous, so please exercise caution.

Our Baseline

For this exercise, we’ll be reviewing the previous 36 months beginning in October 2017. In the intervening months, the S&P has suffered through a number of major setbacks both in December 2018 and mid-Q1 2020 during the initial hit of COVID. Despite that, $1 invested at the beginning of our time period would net a total of $1.38 today.

Diagram shows change to initial baseline on a monthly basis

Rolex Daytona

Since its introduction in 2016, the Ceramic Rolex Daytona 116500LN has remained one of the hardest mainstream watch models to obtain, with secondary market prices generally commanding at least a 50% premium over MSRP.

Using the tools provided by Chrono24, we are able to track the secondary market appreciation of an unworn, white-dial Daytona. With an average price of $19,815 in October of 2017, 116500LN values have risen to the staggering current average of just over $28,000 (more than double the United States MSRP of $12,400).

If we overlay the appreciation graph of the Daytona against the S&P 500 during the same period, it is quite a startling comparison. The graph below plots both the S&P 500 as well as prices of the Daytona as change against a baseline price in December 2017.

With minor exceptions in late 2017, the Daytona owner has beat their benchmark S&P through the entire measurement period. Though in each case here we are tracking unworn watches, pristine used models have tracked in a similar fashion. Just be sure to protect those polished center links! 

Additional Models

If we expand our view to include some additional rare steel models, we continue to see a similar picture. Our expansion adds in the Rolex GMT-Master II 116710BLNR “Batman” and the Rolex Submariner 116610LV “Hulk”.  Even barring the massive price increase seen for the Rolex Hulk since its discontinuation, it still handily beats the benchmark. A Rolex “Hulk” purchased in late 2017 has fully doubled in value according to the secondary-market sales tracking; a “Batman” is not far behind.

Our Take

The biggest questions for watch enthusiasts tracking values are: will the appreciation continue, and can I get one. The increase in valuation is driven in large part to an imbalance in supply-and-demand. With supply artificially constrained for these key models, the values are driven by a demand that far outpaces availability. While it seems unlikely that Rolex will change tack and flood the market with white-dial Daytonas, any positive change in supply (including dealer shipments resuming post-shutdown)  is likely to provide some softening for these price increases. What seems won’t change pricing, however, is global financial uncertainty. Investors have spoken, and they find Rolex models to be a secure investment in uncertain times.

With extensive talk of scarcity and valuation, it’s important that we don’t lose sight of the passion that brings us into the hobby in the first place. Before you consider turning your 401(k) into a 401(BLNR), perhaps take a few deep breaths and actually give your favorite model some wrist time.