Cigars provide a great deal of enjoyment to many aficionados. For many people, cigars are meant to be smoked and enjoyed among friends. However, there are those that also enjoy buying cigars for the purpose of investment. Therefore in this article, we will be discussing what kind of cigars you can invest in.
It must be stated that investing in cigars will come with inherent risks and must be considered carefully. Montefortuna accepts no responbsibility for any losses. This article is to be used for informational purposes and guidance only, this is not financial advice.
If you’re just starting out in the industry then it may be a little confusing about what kind of cigars to invest in. Although historical performances do not dictate any future performance, there are some lessons we can take from.
For instance, in general it seems that Cuban cigars are better investment options. This may change over the next couple of decades, however as it stands right now it’s probably wiswer to invest in Cuban cigars. The second thing seems quite clear is that the premium brands from Habanos perform better than the lesser known ones.
Brands such as Cohiba and Montecristo perform far better over a long period of time than brands such as Vegueros or Por Larranaga. And finally, it seems that limited edition cigars and some regional cigars are almost certain to increase in price over a long period of time.
Limited Editions Cuban Cigars
It may seem obvious, but in almost every case limited edition Cuban cigars have increased in value over a period of time. The reason for this is generally because the demand remains whereas the supply doesn’t. As the name would suggest, these cigars are in limited supply and once production stops, no new batches are produceds.
This isn’t always the case because cigars such as the Cohiba Talisman were initially produced in 2017, and then due to the incredible demand, more were released in 2019. However, in most cases limited edition cigars are produced with a set number boxes.
Due to this lack of supply, they can be a great opportunity for those that aren’t tempted to smoke them. For instance, the Cohiba 1966 LE 2011 cigars were released almost a decade ago. Since its initial price point of around $890.00 (£650.00) based on todays value. The cigars are now retailing for almost $5,000, that’s more than five times it’s initial price point.
Another example is the Cohiba LE 2004 Sublimes. The retail price of these cigars are now an $13,120 (£9,600) and this is signifciantly higher than the initial price for these cigars.
Ultimately, limited edition cigars from Habanos are almost always a good investment if you manage to keep them in great condition for a long enough period of time.
Regional Cuban Cigars
This is somewhat of a mixed bag because it’s difficult to tell which ciagsr are going to appreciate enough for them to be worth the investment. Due to the number of regional cigars that get released and continue to remain in circulation, they tend not to appreciate in value as much as limited edition cigars. This is not always the case and there are plenty of good examples for regional cigars. However, there seems to be a greater risk involved with regional cigars than there is with limited edition cigars.
For instance, cigars such as the La Flor de Cano Magicos the regional editon for Spain is unlikely to appreciate enough in value. However, cigars such as the El Rey Del Mundo La Reina, which is the UK regional edition has already increased in price by about 1.5 times its original price. This is quite remarkable considering the fact that it was only made available to purchase around the middle of 2019.
Based on this, it’s not crazy to think that this particular cigar will appreciate quite significantly in value over the next 10 years.
With regional cigars, it does depend quite a lot and it’s not always certain what will appreciate in value. There is also the fact that none of the major brands from Habanos have any regional editions and this does make selecting the right cigar somewhat tricky.
A Method for Investing in Cigars
It’s always easier to invest in something when you have plenty of disposal income. If money is not an issue then by all means invest in as many boxes of cigars as you like. If however, you’re not in a position to buy absolutely every box of cigar that appears on the market, then this method may prove useful.
Essentially, it’s a good idea to purchase one box of premium cigars every year and put it aside for investment purposes. This way your outlay isn’t significant per instance, however, there is a high potential for a strong return. As of right now the 2019 limited edition cigars could end up being a great opportunity. The Quai d’Orsay Senadores for instance are a great potential. This is the first time that Habanos has produced a limited edition cigar with the Quai d’Orsay brand and that in itself creates some degree of intangible value.
The other factor is that this particular cigar is smoking extremely well and it’s already being praised as a brilliant cigar. After an aging period, these cigars could remain a popular option for collectors and aficionados.
Of course, there are always Cohiba cigars, which seem to be a relatively safer bet in general. This is obviously not a certainty, however Cohiba cigars have performed extremely well over the last couple decades.
This method of purchasing one premium box of cigars annually means that after five years or a decade depending on when you wish to sell, you will have a return every year. This return can then be reinvested into multiple boxes of cigars and can continue to roll over into a larger pot of cash.
Of course if you can manage multiple boxes each year then that is also an option. On the other hand, if your budget doesn’t stretch that far, a single box per year could be a great way to build an investment portfolio of cigars.
Challenges and Risks
Although purchasing one box a year does limit your exposure there are still risks and challenges to overcome. For instance, the way you store your cigars is extremely important. Aging cigars correctly will make a huge difference to the value of your cigars. Mold and beetles are a problem that need to be managed and it might be a good idea to seal each box of cigars individually. These are boxes meant for investment only, therefore storing them in your humidor that gets accessed regularly is probably not a good idea.
Also, it’s probably a good idea to open the boxes and not keep them sealed. As long as the actual seals are legible, that should be fine. It may be an idea to keep a printed screenshot of the Habanos authentication site. The reason it’s a better idea to have the boxes open is so that you can periodically check on your cigars to ensure they’re ok and there aren’t any problems. Sealed boxes are difficult to manage and could end up causing more problems than it’s worth.
Furthermore, the difference in return is minimal and some aficionados actually prefer to buy open boxes anyway due to the reduced risk.
There is also the issue with how long the cigars need to be stored correctly and maintained. Occasionally, certain cigars may increase in value over a short period of time, however for the most part, you’re probably looking at a 10 year time frame. A decade will likely be the initial outlay required in order for you to make enough of a return on your cigars. This amount time helps to ensure that supply for the kind of cigars you wish to invest in have been depleted sufficiently.
This is by no means a defined rule and time frames can vary depending on the kind of cigars you’re investing in. The point is that you should assume there will be a long period of time where there may no return for your investment.
Another thing that needs to be considered is inflation. Since the 1970s, inflation has risen by approximately 40% on average per decade in the UK. This may vary depending on your country, however inflation must be considered when investing in cigars. The reason for this is cigars are a long term investment. The investment period is 5 years as a minium, however 10 years is generally ideal. Due to this, your cigars need to appreciate in value by more than double for them to overcome the issue of inflation.
Once again it must be stated that there are inherent risks involved with investing in cigars and you could end up losing money. It’s always imporant to research and educate yourself before deciding on anything.
Investing in cigars requires a great deal of interest and research. It also requires a great deal of patience and dedication. The returns can be significant although it may require a great deal of time before you see any return.
Having said that, the reason it may be a good time to consider investing in cigars is due to the current shortages. Right now could be a great opportunity to purchase some premium Cuban cigars for the purpose of investment. The shortage will likely have a delayed impact and only truly hit the industry in the next couple of years. As much as we are already seeing the shortage cause problems, this may only be the beginning. The lack of supply could end up being a brilliant opportunity for some.
As mentioned above in the article, this is merely guidance and should not be taken as financial advice. It’s crucial that you perform you own due diligances before deciding to invest in anything.