Port is widely regarded as the world's finest fortified wine but few realise it has investment potential. Well chosen, it can make for an appealing part of a portfolio and all the appreciation is exempt from Capital Gains Tax.
Port may only come from the delimited area of northern Portugal based on and around the river Douro, which aptly translates as 'river of gold'. Most of its vines are planted on steeply terraced vineyards hewn out of the mountains whose region was defined in 1756 by Portugal's Prime Minister, Marques de Pombal. This makes port the third oldest appellation after chianti and Hungarian tokay.
The oldest port firm originated in York. In 1581, Elizabeth I granted the city's Merchant Adventurers a charter which gave it a monopoly over all foreign trade and Henry Thompson joined it seven years later, enabling him to import wine and other goods.
His business developed a trade with Portugal. Port was not discovered until 1678 when two Liverpool brothers found a monastery at Lamego above the Douro whose abbot added brandy during – rather than after – fermentation. John Croft joined the business in 1736 although the company did not change its name to Croft until 1807 and today is regarded as one of the leading port shippers. Many of today's other shippers can similarly trace their origins to British families.
For a successful port investment, seek four key factors:
n Only vintage ports.
n Leading port houses with an auction following.
n Top vintages.
n Purchase and store 'in bond'.
Appealing as wood-aged ports like good tawny can be (notably the stunning Ramos Pinto 20 years old), only vintage goes regularly under the hammer. This means port of a single year bottled two to three years after the harvest.
It does not mean 'late-bottled vintage' which is bottled four to six years after the harvest, 'colheita' (a single vintage aged for at least seven years in cask) or crusted.
Select the magnificent blends made by the port shippers, not examples from single estates, contrary to everywhere else in the wine world. The one exception is Quinta do Noval, whose records date from 1715. Since 1993, it has been owned by the AXA insurance group.
Quinta do Noval 1970 has more than doubled at auction from 200 per dozen bottles 15 years ago to 460 today whilst its 1963 has jumped over the same period from 440 to 950 today.
A vintage port is made roughly three years a decade. The choice as to whether to 'declare' a vintage is up to the individual shipper, ratified by the official port authority. Even in general declarations, there are exceptions, such as Cockburn missing both 1945 and 1977.
The latter was an outstanding post-war vintage and still has potential. From that year Croft has risen from 170 15 years ago to 285 10 years ago and 460 now, all per dozen bottles. Over the same period, the hugely impressive Fonseca has moved from 480 to 820 and 1,010 today.
In more recent years, 1994 is the star, followed by 1997, 2000, 2003, 2005 and 2007. The leading 1994s have the strength to last beyond 2030 and in the last five years have already increased noticeably in price: Dow from 275 to 715 and Taylor from 595 to over 875.
There is still mileage in earlier vintages, particularly since the available stock is continually reducing as it is consumed. Look at 1992 (notably Taylor which made a classic to celebrate its tercentenary), 1991 (Warre has leapt from 180 five years ago to 375 today) and 1983 (Cockburn and Graham have risen from 260 and 250 10 years ago to 425 and 435 now).
Generations ago, a pipe of port would be given on the birth of a godchild or son. The term refers to a port barrel of 712 bottles which few can afford. For investment purposes, the minimum quantity would be 12 identical bottles, ideally held 'in bond', which means stored in a bonded warehouse approved by HM Revenue & Customs.
The benefits of such storage are that both excise duty (27 per dozen 75cl bottles) and VAT at 20 per cent do not have to be paid and that many buyers – notably diplomatic and those living abroad – prefer to purchase this way.
Whether stored duty-paid (such as at home) or in bond, ensure insurance is at the replacement value and not the original purchase price.
Effectively, port profits are not subject to CGT. This tax only arises if a single bottle exceeds 6,000 and is in your possession for over 50 years. However, a port collection forms part of one's estate for IHT purposes based on its value at death, not the original price paid.
Anthony Barne, Master of Wine at Bonhams auctioneers, says he noticed a recovery in the Port market in late 2008 and that it is "continuing at a gentle pace."
Rarities can bring global buyers out. Christie's sold five bottles of Quinta do Noval 1931 in September for 9,775 (estimate 2000-3000). Taylor's have just released two pipes of 155-year-old Port that they managed to acquire from an old family reserve. Called 'Scion', it shows incredible complexity of figs and walnuts and is offered in a hand-blown crystal decanter in a special box: 2,500 from Farr Vintners, Fine & Rare Wines and Nickolls & Perks.
For classic ranges of vintage port, try Berry Bros & Rudd, Justerini & Brooks, Tanners of Shrewsbury and Wilkinson Vintners. Auctioneers to use more for sale than purchase include Bonhams, Christie's, Sotheby's and Harrogate-based Morphets. Remember that they have significant commission charges, both on buying and selling.
There are some good, appealing port shippers whose wines sadly command little investment appeal: Burmester, Delaforce, Feist, Forrester (Offley), Gould Campbell, Niepoort, Quarles Harris and Smith Woodhouse.
However, some shippers noted for their lighter style can show results and have the benefit of usually being less expensive initially. Sandeman, for instance, has seen its 1966 rise from 405 a decade ago to 575 today and 1970 from 180 15 years ago to 550 now.
The port index, rather like the FTSE 100, constructed by Decanter Magazine, stands at 124.28 (based on 100 in December 1996), up 1.38 last month.
Finally, to learn at first hand, base yourself at Solar de Rede pousada (an 18th century hotel) at Mesao Frio in the port region or the recently opened The Yeatman at Vila Nova de Gaia, a stunning hotel set among the lodges where the port matures.