The Investment Side of Philately - Part 1


Author - Richard Lehmann | Wednesday, 06 March 2019

I read that individuals seeking investment alternatives are turning more and more to collectibles and other tangible, portable assets.  This is driven by a number of financial realities such as stock market uncertainty, currency fluctuations and economic uncertainties.  Philately has a definite role in this growing investor interest and with good reason.  Stamps have a very long-term proven track record of price appreciation and of product availability with enough market depth and worldwide interest.

In 1993 I began in depth analysis of stamps from an investment perspective recognizing that the Internet was going to revolutionize what had been a hobby activity, with limited investor participation, into an asset with all the attributes an investor is seeking and more.  I began my research by first devising a system for computerizing the universe of stamps into one database so that selections and comparisons could be made on a market wide basis.  Through building a price history file from catalogs, we were able to measure the price performance of stamps over time and to thereby identify which stamps showed growth potential based on past performance.  We focused on stamps issued before 1950 which had already achieved a catalog value of at least $25.  This initial exercise allowed us to publish a series of stamp selection guides in 1994 titled “Best Buys in Postage Stamps.”  The books addressed over 16,000 stamps giving their appreciation histories and assigning an appreciation potential based on past results. 

Given the passage of time, some 25 years, I thought it would be of interest to now go back and determine just how well my predictions turned out and how good an investment stamps recommended from the past had performed.  I also wanted to see what assumptions could be made about future performance through a more detailed analysis and through adding new assumptions based on stamps which had achieved extraordinary results.  What I found was that stamp appreciation performance could be predicted much more reliably than can be found in most other investments.  I will go into the reasons for this later, but first let’s look at some results.

We analyzed some 16,209 items ($19,512,244) with the following performance results:

1.      We had recommended 6,144 items ($2,860,000) which returned 195.5% or 7.8% a year. 

2.      Of the items with negative returns 914 (5.4%) we had recommended 171 (1.0%).

3.      Of the 2,378 items with an average return of over 20% a year for 25 years we had recommended 774 (32.5%).

4.      We omitted making recommendations on stamps valued at $4,000 or more on the basis that such a high price deserved a more studied approach.   Actual results proved this unnecessary.

5.      Some 8,053 items were not recommended and these returned an average of 6.2% a year.  This demonstrates just how strong the stamp market has been over the last 25 years despite recent declines.

6.      The stamp universe we reviewed (16,209) broke down to annual average return percentages as follows:

0% to 2%                    20.0%

2% to 5%                    26.9%

5% to 10%                  23.2%

10% to 20%                12.3%

20%+                            17.1%

Negative %                   0.5%

7.      The 5 highest appreciation stamps in the last 25 years were the following:

a.      Tuscany #16 went from $180 to $ 16,000 (28,788%)

b.      East Africa & Uganda #59 went from $167 to $40,000 (23,852%)

c.      New Britain # 29F went from $140 to $32,500 (23,114%)

d.      Switzerland #18 went from $52.50 to $11,600 (21,995%)

e.      Russia #195d went from $40 to $8500 (21,150%)

8.      Although our buy recommendations did not include any of the above, the analysis did flag the following which occupied the indicated ranking:

a.      Jammu & Kashmir #4b went from $425 to $45,000 (10,582%) (20th place)

b.      Sardinia #7b went from $40 to $3,600 (8,900%) (22nd place)

c.      Sarawak #77a went from $300 to $25,000 (8,233%) (24th place)

d.      China #42a went from $100 to $7500 (7,400%) (27th place)

e.      Roman States #4b went from $40 to $2500 (6,150%) (29th place)

Some will argue that current market prices are negatively impacted by the Internet which has made the market much more competitive.  Also, the demographics of stamp collectors is negative with four collectors dying for every new one starting.  This shrinking of the collector base is a trend which will continue for another decade or more.  Added to this is that new collectors invariably start buying the cheapest stamps for many years before they become serious buyers of higher priced items.  This is all true, making the current soft market a tremendous buyers’ market for investment quality stamps.  While we see market weakness in the stamp collector market, the same cannot be said of the market for investment quality stamps.  That market is going to be driven more by the growing trend by investors for diversification into collectibles and there is no collectible market with better depth and breadth than stamps.  Once they see the long-term results experienced over the last 25 years, there is little doubt that investment quality stamps are on the brink of a significant growth wave.  Auction results from sales such as the recent William Gross collection will fuel this growth as will the publication of definitive statistics.

Note I focus on investment quality stamps because one should recognize that there is a significant difference between two buyer groups.  Collectors spend most of their funds on the 80% of stamps priced below $25.  Investors focus on stamps priced at $100 or more which represents more like 80% of the money spent on stamps.  This segment of the market will remain strong because its main constraint is that higher priced material is harder to obtain and can be bought by investors at auction, by-passing dealer markups.      

Since my start in stamp research our database has grown to over 50,000 items with over $150 million in value.  Clearly, philately is more than a pleasant leisure time hobby.  It is a worldwide industry that serves a variety of needs of which I have written before.  The type of returns I demonstrated above are better than most other investment options available.  Making this information transparent and demonstrating that it lends itself to objective analysis is the best way to future growth of the industry.  Next month I will review the performance of used stamps and look at some of the countries and stamp varieties that have done the best.  

This article first appeared in the February 2019 issue of the ASDA's monthly magazine, The American Stamp Dealer & Collector.


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