He Begged on His Knees for a Rolex: How Luxury Watches Are Outperforming the S&P 500

Known for preaching disciplined investing and rational portfolio management, Kevin O'Leary admits that his most emotional and exhilarating purchase was neither a stock nor a piece of commercial real estate. The famous investor's object of passion, acquired with a surprisingly emotional approach, is one of the rarest timepieces in Swiss watchmaking: an off-catalog Rolex Daytona.

An Investor's Obsession with the "Mystical Beast"

The Shark Tank star, known for his sharp business acumen, recounted a years-long pursuit for this coveted watch, a process that pushed him to the brink of desperation. Described as the "Mystical Beast" in the watch world, this rare piece led to a private viewing in Los Angeles just before the Academy Awards.

■O'Leary described the allure of the timepiece, stating, "Grown men weep just looking at pictures of this Mystical Beast."

■He admitted to the lengths he went to acquire it, saying, "I got on my knees and begged. Begged."

■It is noted that even Rolex staff had never seen the watch before, making O'Leary potentially the only owner of such a piece.

Time as an Alternative Asset Class

Ultra-luxury watches have matured into a legitimate asset class, offering returns that rival traditional equities. O'Leary previously claimed at a 2023 Benzinga event that the watch market had beaten the S&P 500 for 8 consecutive years. Current data supports the narrative of a resilient and growing market.

■The luxury watch industry, including preowned segments, reached a market value of $75 billion as of 2023.

■According to Fortune, the secondary market experienced stagnation for about 3 years.

■However, data from WatchChart's overall market index shows the market rallied by approximately 9.2% in the last year as of early August.

High Barriers to Entry and Liquidity Constraints

Despite high returns, the luxury watch market remains one of the least accessible asset classes for the average investor. Entry requires not just significant capital but also deep industry connections and considerable patience.

■Investors need a minimum entry capital of around $3,800 (with papers) for a preowned piece.

■Waiting lists for coveted models can stretch from months to years.

■There is a significant holding period; buyers might wait half a year or more to physically hold the asset, impacting liquidity.

Bora Yalın: Luxury watches function as "passion assets" with low correlation to traditional financial markets. However, during liquidity crunches, the extended time-to-sale for these assets can disrupt portfolio cash flow. While the outperformance against the S&P 500 highlighted by O'Leary is valid for Ultra High Net Worth (UHNW) individuals, transaction costs and storage fees must be netted against returns. The rising demand for such alternative assets during risk-on cycles signals potential capital rotation away from conventional markets.