Chris Thompson, CFA is a financial advisor located in Canada with over 30 years of being active in the sports collectibles industry, he has regular articles at his blog- sportscardportfolio.ca and is in search for a high end copy of a 1934 World Wide Gum Lou Gehrig card.
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Every sport has them—indelible moments that become legendary.
There’s Carlton Fisk’s home run in game six of the 1975 World Series that gave the Sox another shot. The image of the catcher attempting to keep the ball fair by waving and willing it to stay inside the foul pole is something one never forgets. And then there’s Michael Jordan’s so-called final shot in game six of the 1998 finals to give the Bulls their sixth championship – the Last Dance. Of course, there’s Tiger Woods’ miracle chip on the 16th hole of the 2005 Masters, the one where the Swoosh logo broadcast itself to the world as the ball hung on the lip before fall. And though none of us were there, everyone has heard about Babe Ruth’s called shot in the 1932 World Series is part of popular culture, and that’s nearly a century old.
Sport brings people together and creates lifetime memories in a way few other things can. That is part of what makes investing in sports cards and memorabilia so special—it is the connection and emotional ties that are created and the ability to share those with friends and family. Of course, it doesn’t hurt, especially these days, that collectibles also have a long and successful track record of being strong investments. Put the two together- the emotional connection and the expectation of making money- and you have a winner.
After all, it is hard to show off your computer screen with your holdings in a Healthcare ETF or Citigroup. Sure, there’s a long history of dodgy investment fads. Think of tulips in Holland in the 1600s, or lava lamps 300 years later. They had their time in the sun, but fell flat as strong long-term investments.
Very few rare items are also conversation starters. But show your buddy a 1933 Goudey of Babe Ruth and you’ll get the attention of even a casual sports fan. These cards transcend mere collecting and have secured themselves by having become part of the zeitgeist.
That said, while emotion builds the connection, there needs to be an enduring track record of financial performance to take them to the next level. And when emotion meets the iconic, you can find some special investing opportunities that only reside in a handful of opportunities, like art, cars, and you guessed it, sports cards.
Three of the most cherished and iconic cards in the hobby are the 1952 Topps #311 Mickey Mantle, the 1986 Fleer #57 Michael Jordan, and the 1979 O-Pee-Chee #18 Wayne Gretzky. The table below show the historic returns with specific prices over the past 12 years based on specific high grades
| 2008 | 2015 | Current | Annual Return *Since 2008 |
||
|---|---|---|---|---|---|
| Mickey Mantle | PSA 8 1952 Topps #311 | $85,359 | $440,504 | $1,162,538 | 22.22% |
| Michael Jordan | PSA 10 1986 Fleer #57 | $6,188 | $18,130 | $407,036 | 39.12% |
| Wayne Gretzky | PSA 9 1979 O-Pee Chee #18 | $4,466 | $22,979 | $243,290 | 37.02% |
Clearly, this is a strong track record of returns that give merit to holding in any multi-asset class portfolio. But, how do the cards fare during recessionary periods? In other words, what off-setting abilities do sports collectibles have when the S&P 500 falls greater than 20% in a given period?
Granted scarce items (some of which may be one-of-a-kind) don’t carry the liquidity of the stocks that comprise the most weight in the major indexes, if we take a look at the last three periods of peak to trough in the stock market we see these key cards have fared extremely well. In fact, these cards have been the safe haven that many investors desire during market corrections.
| S&P 500 Peak | Date of Bottom | Losses | MJ | Great One | The Mick |
|---|---|---|---|---|---|
| 10-09-2007 | 03-09-2009 | -56.80% | 5.15% | 1.16% | 61.66% |
| 09-20-2018 | 12-24-2018 | -19.80% | -8.66% | -5.71% | 2.43% |
| 02-19-2020 | 03-23-2020 | -33.90% | 22.73% | 5.26% | -0.18% |
Removing the outlier (Mantle from 2007 peak to 2009 bottom), the returns in these periods range from -8.66% to positive 22.73%, and remember this is during times of panic on the streets. These were, “I left the oven on and went off to work with nobody home,” kind of panic. It was real.
Why did they perform in this fashion and what does that tell us going forward? From my perspective, it suggests the sentiment that we share about the legends of the game never or rarely wavers, and given limited supply of the truly great pieces, there is always more than sufficient investors who have this items on their want list. In fact, according to Statista, an analytics company, over 74% of sports fans in the United States can be classified as being either avid or casual fans. That’s a lot of sports fans and more of them are transitioning their way to sports collectibles. Couple that with the fact these marquee pieces hold their value even through the most adverse of circumstances, and you’ve got a winning proposition.
When we put investing in collectibles into the context of an overall financial portfolio, there are clear benefits. Certainly our holdings in fixed income—investing in corporate and government issued bonds that provide interest payments and principal repayment— does not provide the income or ballast to a portfolio that it once did for many. This opens up opportunities in the alternative investing space. Alternative investments are assets that go beyond traditional asset classes, such as stocks and bonds, and include private equity, real estate and, yes, collectibles. Historically about 10-20% of pension investment and endowment funds have been allocated towards alternative investments, but with interest rates at historic lows we are seeing holdings upwards of 35% of a portfolio. Collectibles and alternative investments in this low-interest rate environment assist by having an offsetting nature to more traditional investments (stocks, bonds etc.) with unique characteristics of both finite supply and an emotional connection.
From an investment standpoint, rare collectibles have the unique combination of both fixed supply and increasing demand. The finest versions of the iconic cards and memorabilia typically have a very limited supply—with only a handful to several hundred copies available. Put this into the context of tens of thousands of interested collectors, as well as funds and fractional ownership companies vying for the same rare items and it is easy to see how demand will far and away always exceed supply. Stable supply and growing demand is a tremendous combination and one that is markedly distinct to only a few investing spaces, including sports collectibles.
Take Pride in What you Own
Reach into that drawer in the kitchen and show your friend your recent investment statement with your “impressively low” cost base on some technology shares. How’s that conversation going to go? If we’re being honest, it’ll go about as well as noting to your significant other that their jeans are looking a bit snug.
But owners in high quality sports collectibles can take pride and share in their sound investments. Displaying your PSA 10 1953 Topps Mickey Mantle from your app and explaining how this card is as rare as a full moon on a leap year will start a flurry of questions. Everyone knows The Mick, but few can say they own a one of two of the greatest copies of his 1953 Topps card in existence.
We can all recall that singular sporting moment, watching it, noting where we were, and feeling part of that indelible event as it becomes part of history. If you can bring about those same feelings of exhilaration by investing in vintage memorabilia and sports items, and profit in it, that’s a win-win.
Perhaps your next memorable sports memorabilia purchase of that Wilt Chamberlain uniform from his rookie year of 1959 or a bat signed by Jackie Robinson from 1949 will be at the convenience of your family room couch, through a fractional ownership model. Regardless of where you were, the feelings of exhilaration with certainly resonate.
Convenience. Pride in ownership. Sound investment premise and track record of returns. Oh, and profit. Those all sound like good things. Do you want to learn more?
To find out more about investing in Sports cards and collectibles, please visit the how it works section on the Collectable App or visit Collectable.com
Chris Thompson, CFA is a financial advisor located in Canada with over 30 years of being active in the sports collectibles industry, he has regular articles at his blog- sportscardportfolio.ca and is in search for a high end copy of a 1934 World Wide Gum Lou Gehrig card.
Glossary of Terms
Alternative Investing -Investments that extend beyond traditional holdings in stocks, bonds, mutual funds, and ETFs, this may include private equity, infrastructure, commodities and extends into art, wine, collectibles, such as sports cards and memorabilia
Grading Companies – third party companies that provide sports card and memorabilia both authentication and a rating, typically from 1-10, with 10 being the highest based upon on several factors, examples of grading companies include PSA (Professional Sports Authentication), BGS (Beckett Grading Service, SGC (Sports Guarantee Certificate), JSA (James Spence Authentication)
Fractional Ownership – represents shared ownership in an investment, typically the item is converted into shares and investors can own a part or fraction of an item, such as art, cars or sports collectibles
