Appetite for Art Propels Sotheby's, Yazzy's www.williamverdult.com

Sotheby's Stock Chart

As the fall auction season gets under way, and as the market for fine art shows no sign of slowing, investors are bidding up the shares of Sotheby's, the venerable Manhattan-based auction house.

Sotheby's shares were trading in the upper $50s last week, up about 68% from a year-earlier level of $34 when Barron's outlined the potential for big gains in the shares.

The shares have snapped back nicely since slumping to $35.52 a share in August on concern that upheaval in the financial markets might sap demand for fine paintings, sculpture and other collectibles. Wall Street securities analysts now see them hitting $60.

One sign of strength in the art market: Sotheby's third-quarter auction sales came in at $322 million, 40% higher than the year-earlier level. It was the fourth consecutive quarter in which sales growth exceeded 30%, year-over-year. Those numbers don't include the sale of the Rostropovich-Vishnevskaya Collection, which was previously scheduled to be auctioned, in a private transaction to Russian billionaire Alisher Usmanov for an estimated $50 million.

Indeed, the newly wealthy in fast-growing emerging economies around the globe continue to drive the art-collecting boom. Sotheby's recent Hong Kong auction of contemporary Chinese art set a new record and saw broad-based buying from Chinese and other Asian and Western buyers. The stage is set for more strong showings in the major auctions in New York next month, when Sotheby's will auction paintings by Van Gogh, Picasso, Koons and Bacon, among others, in its Impressionist and Modern Art and Contemporary sales.

Amid the collecting boom, Sotheby's raised its commission rates for the second time in two years: in September, the auction house began charging 25% on the first $20,000 of a lot, up from a previous 20%.

Analyst Kristine Koerber of JMP Securities recently raised her estimate for Sotheby's earnings this year to $2.97 a share from $2.82.

Says Jim Margard, chief investment officer of Seattle-based Rainier Investment Management and a longtime holder of the company's shares: "We continue to like Sotheby's. Most Wall Street estimates are probably a little low for the quarter and have underestimated the strength of global demand, so we expect earnings to exceed estimates."