Why the best, and worst, place to buy a luxury watch is at an auction

Like other men with a passion for watches, Cade Mlodinoff began his obsession by coveting one model. It was a Tag Heuer. It cost him $400 when he bought it at age 10.

"At the time, it was every dime I had," said Mlodinoff, 33. "My obsession kind of grew from that."

For decades, watches have been symbols of luxury, wealth and personal taste. But their potential as investments is now more easily tracked and understood. You can credit technology for shining a light in dusty watch shops.

An auction for vintage and modern watches recently at Sotheby's raised more than $11.7 million Last year, Paul Newman's Rolex Daytona sold for  over $20 million, not including the auction premium.

But that's rarefied air.

"Quality vintage watches can be bought for a few thousand dollars," said John Reardon, the international head of the watches at Christie's. And the market for watches that cost less than US$10,000 "is one of the areas of most aggressive growth at the moment."

A shift in the market

Until recently, collectible or vintage watches were generally bought at watch shops or through auction houses. Mlodinoff, who lives in Chicago, said he remembered going shop to shop, trying to find what he was looking for.

"There was the Rolex guy, the Cartier guy, the Omega guy – that's what you did back in the day," he said. "I didn't have the disposable income for five or 50 watches. I had the income for one, two or three watches, so if I wanted something new, I sold something old."

He now has about 20 watches, but he is still selling as well as buying.

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Websites like WatchBox and Hodinkee go beyond just selling watches and aim to create greater transparency for people who buy watches for thousands, not millions, of dollars. They want to increase visibility in a market that has often been opaque.

"We're monetising a wristwatch as if it's an asset," said Danny Govberg, the chief executive of WatchBox. "Watches have an underlying value, just like a diamond. You can take a diamond anywhere in the world and sell it. We're creating a worldwide market for watches."

A dichotomy of control

​When it comes to watches as investments, the market is dominated by two brands: Rolex and Patek Philippe. But that does not mean all their watches are great investments.

"Rolex has become a cultural symbol and a status symbol," said Benjamin Clymer, founder and chief executive of Hodinkee. "The quality you receive in a Rolex is above most other watches at that price point."

Patek has invested heavily in marketing campaigns that focus on its watches as heirlooms. But Clymer said the brand does not translate immediately into appreciation.

He said that the company's signature watch, the Calatrava, which costs about $26,000, is like any new car. "If you bought it and tried to sell it the next day, you'd take a bath," he said.

"They're not always great investments, but there is a track record for them becoming great investments," he said of the Patek Philippe timepieces.

Scarcity and desire

Watches that are known beyond aficionados have a tendency to increase in value, Clymer said. Newman's Rolex Daytona is one. The Omega Speedmaster, which astronauts wore on the Apollo 11 moon mission, is another.

"That Speedmaster has a place in world history," he said.

But sometimes the high prices that watches fetch have as much to do with luck as anything else.

At a recent Sotheby's auction in Geneva, Schnipper had a Rolex Daytona with a dial that had faded to a brownish color, an aging process that results in a rare "tropical dial." The person who had consigned it paid less than $300 for it in the 1970s. Schnipper expected the watch to fetch $260,000 to $530,000; it went for approximately $1.2 million with the auction fee. A regular Daytona from that time would sell for around $195,000.

Adrenalin rush

Dave Terry, a watch collector and chief executive of Hub International Insurance Brokers, tries not to get swayed by auction prices.

He said he focuses on collecting four brands: Rolex, Patek Philippe, Audemars Piguet and F.P. Journe, which he thinks will hold their value. He tracks the values of many models in different conditions on a variety of sites and at auction to get a sense of their worth, but he believes the value at auction is not always accurate.

"You get a bunch of boys in a room with testosterone who've had a few drinks and they can bid up a watch," he said.

NY Times