Investing In Stamps – The Dynamics Affecting Stamp Valuations


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The valuation of any item is subject to a variety of factors some of which appear universal and others which are unique to the product. This is true for investment grade postage stamps but, to make a fair approximation of fair value of such stamps, one needs to have a grasp of the variables. Stamp dealers will tell you, “A stamp is only worth what someone is willing to pay for it.” This simplistic mantra is their way of letting you know that they have no idea. The subject, however, is worth pursuing because most high-end stamps are underpriced. Let’s look at this in some detail in order to see where underpricing can be detected, and better yet, influenced.

First, let’s talk about stamps in the $100 to $1,000 range because they represent a price range where the most potential for undervaluation exists. This is because the price is too low to make it worthwhile for the dealer to do much personal research on pricing beyond the Scott catalogue pricing. It is also a price range where you can actually find stamps for sale somewhere on the Internet. This brings up Rule 1 for stamp valuation, namely that difficulty in finding a specific stamp is itself an indication of under-valuation. Dealers who specialize in specific countries or high value items know these stamps but, won’t tell you which are underpriced until they have one to sell you, or want your name so they can offer you the next one they find. These stamps represent 43% of the mint stamps and 41% of the used stamps in our 60,000 universe of investment grade stamps. Best among these are the 9,251 stamps where both the mint and used stamp is in this price range.

Stamps which sell at above $1,000 all the way to $1 million tend to be the best investments because of Rule 2, which is that the more expensive a stamp is, the more rapidly it appreciates in value. This is a rule precisely because past performance of the 60,000 items we follow demonstrate conclusively that it is true. Buying such stamps is generally by public auction where the majority of the participants are dealers and high net worth individuals. The investment buyer has the advantage here because the dealer buyers need to make a profit on the resale of any item they buy so, the only competition for the investor buyer are other investors or a collector who may even overpay for an item they need to complete a collection. If more than one collector is there, don’t try to compete since you will almost certainly overpay. I should add here Rule 3 which is that the faster a stamp has appreciated in value, especially in the near term, the more likely it is to continue to do so.

Stamps which sell in the $10,000 and higher category are trophy stamps that have a momentum of their own. They are often stamps with a story such as the Penny Black or the British Guiana, the most expensive stamp in the world which has an entire book written about it. A leading US stamp authority, Max Johl wrote in 1932 “Without a story, a stamp is but a colored piece of paper.” This is so true because it lies at the heart of the advertising industry. It is also so because most stamps are issued to commemorate events which are often of historical significance. A term used in the stamp industry to describe a stamp’s story is provenance, and it is as important in stamps as it is in art. Past ownership by famous individuals of specific stamps serves the same purpose. Stamp auction houses are well aware of this and spend a great deal of effort creating provenance for their offerings. Cherrystone Stamps is one of several auction firm whose researched description and handling adds to an item’s provenance. Hence, Rule 4 is, look for items with provenance and preserve it for its eventual resale.

The quantity of stamps printed is a valuable marker of appreciation potential. Rule 5 is, research the printed quantities of a stamp to find items where rarity can become a valuation element. The German Michel catalog is one which tracks this information, but country specific catalogs are another source of such information. As a personal example of what can be done here, seven years ago we discovered that MEPSIPSI
, the Mexican stamp collectors’ organization, has for decades published research reports and detailed information on early Mexican stamps, including printing, usage and unused quantities information. As a result, we were able to produce a catalog of what are termed “Mexican Foreign Mail stamps”. These stamps have only 66 listings priced in the Scott Catalogue and even fewer in most other catalogs. What was ignored was that each of the 54 postal districts in Mexico received periodic shipments of stamps with their unique postal district and year printed on it along with a district name overprint. There are over 3,000 varieties and errors of these stamps, many with quantities as low as 1 or 2 and hundreds more with quantities of less than 100. That’s printed quantities from 140 years ago! Survival rates are probably 20% at most for used items and maybe 80% for the unused ones sold off after they were no longer used. We began displaying a catalog of these stamps on the website about 5 years ago with pricing based on quantities printed. Retail prices have risen significantly since albeit, many sellers have still not gotten the word. It’s like buying common stocks where only you and a handful of others know the actual earnings of the company!

As I say in my book MoneyStamps (available on investment grade postage stamps defy some of the principal rules of supply and demand. A principal rule is that when demand is high, prices rise causing supply to increase. With investment grade stamps, the surviving supply is constantly decreasing in an absolute sense because of damage, loss and deterioration. What exists is mainly in the hands of collectors who don’t respond to price increases by selling off this small segment of their country collection. They will hold their stamps until they die. In short, there is no mother-load of supply to cause prices to decline. A second economic principal is that there is a natural ceiling to how fast and how high the value of an item can rise. Stamps have no such constraint because they have no intrinsic value much like Bitcoins, however, they have a physical value which is recognized worldwide. They are extremely portable and, ounce for ounce, are one of the most valuable commodities in the world. They are the closest thing to paper gold.

In this discussion of a stamp’s value note, I am ignoring the premium or discount from catalog value a specific stamp commands based on its physical condition. This is a major consideration in stamp pricing but, an extensive topic all its own.

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