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Last Updated On: July 10th, 2023
In my early days of sports card collecting, I’d typically buy my favorite players’ cards, including rookies, refractors, hard-to-find inserts, and anything I felt was collectable for the long term. I’d head to the grocery store or a local card store to pickup the latest Beckett price guide to see the familiar up and down arrows signifying the increase or decrease of value for a particular player’s card.
Personally my first expensive piece
Flash forward to the mid-to-late 90’s, and all the concepts I had learned and practiced, such as buying, selling, trading, speculating, price action, and volatility, would pave the way for learning how to invest in the stock market. What appeared to be two completely different (and irrelevant) markets actually turned out to be strikingly similar in so many ways.
Table of Contents
Lots of Selection
One of the more obvious similarities is the vast selection of possibilities in either market. Literally thousands of companies trade on the U.S. stock market exchanges (e.g. NYSE, NASDAQ, etc.). Most companies you can think of, such as Apple, Google, Disney, and Netflix trade publicly on the stock market. Nowadays, you can open an account in minutes and be buying and selling stock in the same day.
How about sports cards? Imagine each sport has hundreds of players, multiplied by decades of existence, multiplied by several brands of cards, multiplied by many combinations of types of cards (e.g. refractors, die-cuts, autographs, jerseys, rookies, XRCs, short prints, etc.), multiplied by condition and grade, and you start to get the idea. This massive selection to choose from can also be loosely referred to as the “supply”.
Supply and Demand Moves Markets
When a certain player is hot, you can almost certainly expect to pay much higher prices to acquire that player’s card than when they’re sitting on the couch during the offseason, or injured, or having a crappy season.
So, when is a player hot? Think Zion Williamson debuting in his first NBA game after being the most hyped rookie since Lebron James. Think Lebron James going to the LA Lakers and all the media attention it got (and gets). Think Giannis Antetokounmpo, just murdering the league with points, rebounds, defense, MVP chants, and leading his team to the best record in the NBA. Also Kevin Durant, winning a championship with the Warriors in the middle of the summer.
If you consider buying a player when they’re hot, you’re invariably going to pay a premium for that player’s card, compared with when it’s off-season or they’re injured and not getting media attention. In the latter case, prices will be depressed, and you’re getting in when it’s relatively cheap because most other people aren’t buying when you are.
To put it a different way, imagine on average there are 100 people looking to buy a Stephen Curry rookie card. If Curry goes on to win MVP, breaks the 3-point shooting record, and wins an NBA championship, he’ll be all over the news and those 100 people turns into 300 people vying for the same card (the “supply”). These 300 people are what’s known as the “demand”, of course. I know it’s economics 101, but sometimes it doesn’t hurt to be extra clear 🙂 If you want to know what paying a high premium looks like, check out the insane rise in value for Lebron’s Topps Chrome rookie card. Note: this card is trading around $2,900 as of April, 2023... crazy!
This is true in the stock market as well. It’s very common as a new investor to jump on the hype train and buy the stock of a company you hear about in the news, only to be buying it near it’s high and seeing it drop 20% in a matter of weeks. Two more recent examples include Beyond Meat (BYND), and Tesla (TSLA). If you take anything from this section, it’s to ensure you’re not buying something when everybody else is pouring in and paying insanely high premiums.
Return on Investment
Both stocks and sports cards can have a return on investment. Since 2008, the sports card market has enjoyed a huge rise in value. While this could be viewed as too far too fast (we’ll cover this in a future post), it’s kicking the S&P500’s butt in the process. What’s the S&P500 you ask? The top 500 companies listed on the U.S. stock market measured as an index average.
As a sports card collector, I never really bought my favorite players’ cards thinking they will rise in value down the road. While I knew they generally would, it wasn’t why I was making the purchase. I didn’t realize the surprise leap in value until many years later when I started checking the prices out of curiosity (I’ll show you how to do this in a future post). Cards that I was picking up for $600 were jumping to $2,000 in just a few years. A Michael Jordan Fleer RC (professionally graded BGS 8) I had picked up for around $700, turned into around $2400.
Buy and Hold or Trade
In the stock market, it’s not uncommon to hear about “traders”; usually professionals that buy and sell stocks with a relatively short time horizon to hold that stock or dump it (e.g. hours, days, or sometimes just a few weeks or months). Their goal is to make a quick profit and move on.
Warren Buffet famously once said, “Our favorite stock holding period is forever.” This strategy is obviously the polar opposite of what traders do. Buffet is famous for being an extremely good judge of company quality, value, and leadership. He consistently has shown a knack for buying companies and holding onto them forever to make a ton of return on investment. While Buffet consistently sells stocks and at times gets some decisions wrong, his overall track record makes him the best investor of all time.
With sports cards, it’s actually very common to have a buy and hold mentality. This can be attributed to an emotional attachment to your favorite player or team, and usually you start out when you’re just a teenager without really trying to understand the economics of it all. That said, we would consistently trade certain cards for other ones, but for very different reasons. If you had a few duplicates of a certain player’s card, it would be common to trade one to get a new card you didn’t have; hopefully a win-win for both collectors.
Lately (let’s say since 2019), the sports card market has started to get really hot, and you can see the makings of an extremely volatile, and speculative market unfolding. While sports cards have been on a tear since 2008, the last 18 months or so have been parabolic! Remember those Lebron Topps Chrome rookie cards mentioned earlier? Watching that card jump from $1,000 to $6,000+ in a matter of 3 years is screaming over-heated market.
Volatility
Volatility is a fancy term usually used in reference to wild, unpredictable swings in stock prices. Something is said to be “volatile” when it’s behaving outside of a typical pattern of behavior, and normally at extremes.
Tesla (ticker symbol TSLA) and Beyond meat (ticker symbol BYND) are volatile stocks. Going up hundreds of dollars per share in a matter of months is almost always not a justified, fundamental swing in prices.
While some stocks can stay depressed in price for a very long time and spring to higher prices very quickly, it’s rarely a justified move unless they crush their earnings as analysts are expecting a lackluster quarter instead. In either case, volatility can be seen as drastic up or down movements in price and for prolonged periods of time (usually at least days or weeks).
It’s no surprise that the sports card market experiences volatility as well. Part of this can be attributed to a less “liquid” market. While there is lots of selection as I mentioned at the top of this post, there isn’t a lot of supply for a given card or player readily available as compared with the stock market.
Millions of shares of stock trade hands each day in real-time (billions when looking across all publicly traded shares). The cards market probably trades just a few thousand, and a lot of the buying/selling occurs on Ebay.com over multiple days (not in an instant, per se). It’s very typical to see a sports card soar in price over one summer, only to see the value depress after some time passes and the hysteria fades. Volatility creates more opportunity to buy and sell cards for a profit, but also leads to speculation and risk in the marketplace.
Speculation
Speculation in the sports card world can be as innocent as buying unopened packs, boxes, or cases of a product and ripping it open in hopes of finding high-value cards you can flip to make a good chunk of money. Now obviously most collectors start at a young(er) age and enjoy sports cards for this exact reason. Most of us don’t get into collecting to simply invest, but it’s funny how comparable buying and selling cards can resemble stocks.
Other types of speculation include buying many of the ‘hot’ players mentioned above, in hopes that the hype is not just hype, but getting in early on a player’s future value. If Zion Williamson IS the next Lebron James, paying $4,000 for his gem mint rookie might turn out to be a fair price. But to speculate any player will be the next Michael Jordan, or the next Lebron James, is a tough gamble. Remember good ol’ Greg Oden? Me neither 🙂
In Summary
If you’re currently a collector, stock market investor, or looking to get your feet wet in either market, you’ll find the skills learned can crossover quite well in either direction. This blog is primarily about collecting and investing in sports cards, although you’ll read and learn a lot about what drives markets, economics, buying, selling, and most of all returning some kind of profit on whatever you do — even if it’s buying and holding your favorite player’s cards for the long term.