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Quick Hits: How Are Hermes Birkin Bags Performing as an Investment?

Quick Hits: How Are Hermes Birkin Bags Performing as an Investment?
September 29, 2022
Dylan Dittrich

In a collectible alternatives world frequently dominated by overwhelmingly male pursuits like sports cards and comic books, not enough attention is given to female-centric assets that draw large sums at auction, present the opportunity for appreciation, and are highly aspirational. Hermès Birkin bags fit those attributes to a T - so much so that even Kylie Jenner has hailed their status as an investment. Maybe not the world's preeminent source of investment advice...then again, she was among the youngest self-made* billionaires in history, and we were not.

The bags have worked their way onto fractional markets, with one appearing on Public and seven on Rally (in addition to a Picnic Kelly). However, they have not been particularly well-received. To date through September 28th, fractional Birkin assets are down 25% on average, with none of the assets producing positive returns thus far.

But is that representative of the reality of performance for these assets, or is it just reflective of a fractional audience that is less interested in the category?

To better understand the situation, we took a look at the two bluest-chip Birkin assets available fractionally: the Himalaya Birkin and the Blue Sellier Faubourg. At handbag-focused auctions, you'll very frequently find one of these two or both among the top-selling lots, which makes them terrific examples to use in understanding the high-end market.

The Faubourg was IPO'd on Rally in January of 2021 for $165,000. Today, it sits at $99,000, down 40%. The sales history isn't incredibly long, since the bag was released in 2019, but since January 2021, it has sold seven times at Christie's and Sotheby's. Just one sale has occurred below $165,000, a $127k result in April. Examples have sold twice this month, for $180k and then $164k most recently. To the extent there is a trend over the last ~two years, it's moderately down, but still, at no point has a realized sale approached the depths of the current market cap.

Note: "Fractional Market Cap" is not a full representation of the asset's trading history. Data points are included only on the same day as a comparable auction sale.

In fact, looking at the chart, you can see that only at the point of one sale - the lowest - the fractional market cap was higher than the comp. Other than that one moment in time, the Faubourg has spent the vast majority of its trading existence valued well below comps.

The story is similar for the Himalaya Birkin, which was IPO'd earlier (in May of 2020) and features a longer sales history. This Birkin was offered at $140,000 and trades today at $100,000 - a 36% loss. Since the IPO date, a Himalaya has sold at auction at Christie's or Sotheby's 16 times. At no point has the result sold beneath the six-figure level, but there have been a handful of instances where sales came close. Sales of the Himalaya are more volatile, and that makes sense; they are released annually, albeit in small quantities, so there is greater supply and a greater frequency of sales. Also worth noting: the 30cm size is far and away the most common, which contributes to the frequency of sales. Notably, smaller sizes have experienced greater and faster appreciation in recent years - the 25cm size is the record holder for price. Volatility can also be attributed to the unique nature of each bag. Coloration is a common source of differentiation between bags, with some seeing much starker contrast between the white center and the darker sides, and others seeing more muted difference between the two.

Note: "Fractional Market Cap" is not a full representation of the asset's trading history. Data points are included only on the same day as a comparable auction sale.

We've included a rolling average of the last three sales on the chart to smooth some of this volatility and provide a different frame of reference. The general trend over the last three years is flat to modestly up, with spiking values at the peak of financial exuberance in late 2020 and 2021. On the date of each auction sale, we've also plotted the fractional market cap. Due to the wide range of results, we do see the occasional break of fractional market cap above comps, but market cap has still spent the duration of its existence below the rolling average.

A glance at essentially any sales chart of the Birkins trading fractionally will demonstrate an upward trend amidst boom and (to a lesser degree) bust activity. Auction results have the potential to vary wildly, but particularly pre-2020, the trajectory was a steady, if slow, climb higher. Of course, 2020 and 2021 brought greater potential for outlier sales to the upside which somewhat muddy the trend. Today, amidst a decline in broad financial speculation, we're witnessing a cooling of demand that paints a less bullish picture short term. Today's rolling averages of the last three sales for the Himalaya and the Faubourg are 21% and 34% lower respectively than they were at peak in the middle of 2021.

Like many luxury assets, Birkins are not totally immune to market turbulence and to the whims of speculative appetite. But we may be approaching a critical moment as we near pre-2020 levels and track closer to longer-term trend. Whether Birkin appreciation gets back on track or not, fractional investors may take notice of values that consistently and significantly lag comps.

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Disclaimer: You understand that by reading Altan Insights, you are not receiving financial advice. No content published here constitutes a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. You further understand that the author(s) are not advising you personally concerning the nature, potential, value or suitability of any particular security, transaction, or investment strategy. You alone are solely responsible for determining whether an investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal financial situation. Please speak with a financial advisor to understand if the risks inherent in trading are appropriate for you. Trade at your own risk.

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