Sports memorabilia has been on fire with some prices for
select athletes going through the roof.
Often this phenomenon is related to the health of the economy however memorabilia
often outperforms the market in a recession.
Don’t be fooled though, it takes a lot of hard work and research to be
successful, as investing in the right items is essential to getting the best return
on your investment.
I personally own millions of dollars of sports collectables
and memorabilia and have been investing consistently since the 80’s. I have also lost a ton of money in this hobby
along the way. For example, I purchased
many complete baseball card sets and unopened wax boxes in the 80’s, which are
nearly worthless today.
Looking back I should have invested all of that money in one
or two single cards like a Mickey Mantle Rookie or early edition Ty Cobb or
Babe Ruth. Not only would they have made
me a fortune but I would have saved a ton of space in my house.
Like so many entrepreneurs I don’t like to dwell on the past
but rather learn from my mistakes. As I
look back I realized that everything I purchased was on instinct. No rhyme or reason for the purchases, rather
an assumption that more is better and that everything would always go up in value.
With the advent of authentication and grading, statistical
analysis has become a valuable tool in analyzing investment opportunities. Today, I never make a purchase without
applying analytics and establishing a current and potential future value.
PSA/DNA is a professional authentication and grading service
primarily used for sports memorabilia.
They are the industry standard and probably cover 98% of my
collection. In this day and age of fraud
and forgery, the need for authentication is essential and most items of any
significant value will not sell without it.
For more detail go the website at
www.psacard.com
Additionally, grading is essential to applying any type of
analytics as it is impossible to determine value or potential value if the
condition of the memorabilia or card is subjective.
The biggest challenge is not running the analytics but
capturing historical data. Ebay only
provides a couple months of sales so collecting sales over multiple years can
be challenging. I use a few popular
auction sites that provide this type of data.
Although we use a variety of statistical tools that can be
rather complex in nature, today I want to give you a basic example of ones that
can easily be applied with a little effort.
We will be analyzing the 1986 Fleer Michael Jordan Rookie
Card. I will be applying a simple method
called Regression Analysis which is widely used for prediction and
forecasting. In the following examples
is shows the simple relationship of value over time for four different
grades.
I ran the analysis on Microsoft
Excel which is likely the most common spread sheet amongst the masses. Here is a basic youtube how to video. https://m.youtube.com/watch?v=Cltt47Ah3Q4
The first
analysis is for the Grade 7. Here you
can see the trend line is heading up nicely.
The R2 tells us how close the trend line relates to the data. A score of 1.00 is perfect so the higher the
better. In this case .76 is pretty good
so we can believe that the trend line reasonably fits the current data and will
be a reasonable prediction of the value going forward.
So this indicates that I would expect to pay an average of
$1,372 for one of these cards in September 2018 and that the card has gone up
in value over 340% over the last 11 years.
Not a bad investment.
Now lets look at grades 8-10.
Grade 8 has almost an identical return on investment to
Grade 7 with almost an identical trend line fit. Expected average value in September 2018 is
$1,921.
The Jordan Grade 9 Rookie is an entirely different
story. Although the trend line
correlation is not as strong as the Grade 7 and 8, it is still good. However, the Grade 9 has been a much better
investment over the past 11 years with over a 460% return on investment. This far exceeds the Grade 7 and 8.
The Grade 10 analysis has many concerns. First of all there is not a lot of data to do
a good analysis of this grade. Second,
the R2 value is much lower than the others indicating a lot of
variability in sales price and therefore a poor predictor of current and future
values. Second, if you look at the
history it shows a lower return on investment of just over 180% over 11
years.
In summary, running a brief analysis of these potential
investments has revealed a lot. First,
three out of the four have returned excellent and consistent profits over the
last decade and predict further solid returns going forward. Second, the Grade 10 is very high priced,
highly variable in price, and has a lower return on investment on a percentage
basis. I would stay away from it. Lastly, the diamond in the lot is the Grade 9
as it has returned significantly better profits than all the others.
I will be buying Fleer Jordan Grade 9 Rookies only….
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