Bank on the Art Boom With Sotheby's - Barron's

Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

Sotheby's by Kopin Tan

Summary: As art prices soar, so do Sotheby's Holdings Inc. (BID) shares, up 42% at $49 since a Barron's plug in October. But traders shouldn't expect the usual summer slump after spring auctions. Robbert von Batenberg of Louis Capital forecasts a $1.72 EPS vs. the current consensus of $1.34. Sotheby's has upcoming guaranteed sales for an estimated $329 million, and it's enjoying the pound's 7% rise against the dollar in 2007. The Christie's-Sotheby's duopoly guarantees prices and commission rates, which rose over 10% this year. The moneyed class complains of overpriced art, but they're still buying high—which encourages sellers to sell and keeps the boom going. New art prices also boost prices for Sotheby's more traditional fare. Sotheby's stock is 11% held by shorts making it a good contrarian play. Barron's Bottom Line: The art boom usually peaks after the stock market does, so it's still going strong. Von Batenburg sees a $66 stock by 2008.

Related Links: Sotheby's Stock As A Market Barometer • Running and Gunning Into Earnings Season: Time to Take Profits? • Sotheby's May Impressionist Auction Could Bid Up The Stock

BID 1-yr. chart: