Sotheby’s (BID) as a Market Indicator

Posted by Investing Freak on March 14, 2010
Market Analysis

I came across an interesting article today on Sotheby’s (BID).  Some analysts and websites praise it for being a leading market indicator.

Since it caught my attention I decided to do some research on it.

According to Investorwalk.com

Sotheby’s (BID) is an auction house for expensive artwork, jewelry, antiques and collectibles. It could be used as a gauge to measure hot money and liquidity flowing around the world. The argument: when super rich people have too much money to burn, they will bid up the prices of expensive art sales by setting one record after another.

Using a specific stock as a leading indicator doesn’t sit well. Sure Sotherby’s might have declined a bit early than the rest of the market for a few recessions but historical data can’t really predict the future.  Sotherby’s, being just another business out there, might take more risks and make wrong bets causing their price to go down while markets stay their course.

While at Artmarketmonitor.com an article got written in March of 2009 where they Quoted Barron

John Angelo, a hedge-fund manager who sits on Sotheby’s board, has bought 125,000 shares in the auction house since March 6 for about $970,000, or an average of $7.74 per share.

Granted, less than a $1 million is hardly a big play, especially for a director of the company. But when a number of smart market players make a move into Sotheby’s stock, no matter how depressed, it suggests a level of confidence about the art market in future, don’t you think?

Now we come to the point where I put my visual charts to work (I am a visual person).  Bespoke Investment debunks this Sotheby’s myth but I am willing to test it right here. (Click Pictures to Enlarge)

Well I am sort of convinced. If we used BID as an entry and exit signal we would have had fewer fake-outs.

Also the March bottom is Interesting as BID took nearly two weeks in a range and finally broke out.  (Below is a close up of the March 2009 Lows)

Will  Sotheby’s (BID) continue to be a “leading” indicator?  Like all other indicators, this stock might lose its name with time but until it’s proven wrong I am  adding this to my indicator arsenal.

Voice your Opinion below in the comment box.

-K

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1 Comment to Sotheby’s (BID) as a Market Indicator

  • BID looks toppy right now on the daily. Until it gives a sell signal, it’s still a go. I noticed it wavered a bit lately compared to the SPY, but that’s the way ICE used to do. Up is up regardless of the pullbacks.