Can Stamp Value Appreciation Be Predicted?

StampFinder, has been at the forefront of efforts to demonstrate that postage stamps are not just an investment, but also, an investment with positive features found in securities or other better known instruments for the growth and preservation of wealth. As far back as 1992 we began accumulating cost information on what we considered investment quality stamps with a goal of finding attributes and patterns among those stamps which demonstrated a clear history of price appreciation. The goal, of course, was to identify those stamps showing the greatest appreciation in the past while likely to also have the highest appreciation in the future. To achieve this however, a number of other factors were considered such as the composition of the stamp market for specific countries,  as well as currency fluctuations, demographic considerations and the politics, size and economic strength of the country of issue. 

Forbes magazine took note of our efforts in this new investment opportunity in an article published December 21, 1992 titled “The Stamp Arbs.” We were asked to give some recommendations of stamps to buy and supplied 7 recommendations. We went back recently and found that over 27 years those stamps had appreciated 301% or 11.1% per year on a $1920 investment. How many other things fared as well? 

The irony is that many stamp investors aren’t even that interested in stamp appreciation. They often have more money than Midas and just want to preserve what they have, or they want to hide their wealth, or they live in an unstable country where a very portable item that is not easily recognizable is an important resource when one needs to flee the country on short notice. 

Some additional factors argue for diversifying in investment grade stamps;

·        The supply is fixed and does not respond to demand. Supply is more a function of death of a collector or investor than demand. An exception was the early 1980s inflation which ran up the price of gold and silver as well as stamps due to sheer speculation in which the holding period by speculators was measured in days rather than years. Many dealers got caught up in this speculative wave and took losses so, today they will still tell you how stamps are a bad investment. 

·        The price appreciation of stamps is very stable precisely because the available supply of any given item is so low. Most of the price fluctuations we see in stocks is not in stamps because the three elements that cause most price fluctuations; interest rates, economic performance and political stability are not part of the buy/sell equation and often are counter indicators on the upside much like gold.

·        Investment caliber stamps share a superior demand profile from run of the mill items. Hence, when an investor wants a specific stamp he wants multiple copies. Stamp collectors, on the other hand, are looking for only one copy and resents having to pay full price since bargain hunting is a great part of the hobby. They resent having to bid against an investor who is willing to pay full price at an auction. Dealers hate them even more since they need to have sufficient margin over resale at retail to collectors.  

·        We also note that, in general, the higher the price of a given stamp, the more rapidly it will appreciate. In the securities market there is no such relationship between the price of a security and its potential appreciation except, possibly, in the reverse.

·        Stamps serve as an alternative currency in countries with taxes on money transfers and a need for secrecy from government in the transaction. For example, individuals sending money from the USA to relatives in Iran do not want the government there to know their address in the USA. It is a terrorist state and can compel the USA relative to shelter a visiting terrorist to avoid their relatives being imprisoned.  Better to send the relative a valuable stamp which they can sell to a local money changer who sells it to someone wanting to hide or get money out of the country.

·        The stamp market is considered a hobby market and thus has none of the legal constraints of the securities markets. They are also traded worldwide on the Internet or at international and local auctions. However, the quality of any given stamp is a huge factor in its pricing, so misrepresentations are extensive especially as prices rise. It’s no place for amateurs, so get to know the pitfalls and how to avoid them before you buy.

We discuss each of these issues in an analysis of the stamp market in my book “MoneyStamps – The Safe-Haven Investment In An Unsafe World.” Since publication of this book in 2020, we have refined the analysis of individual stamps to make them easier to evaluate as only about 60,000 stamps qualify under our definition of ‘investment grade’.  But within these 60,000 items there are radically different potentials just as in securities, which are ranked by credit agencies from AAA to C. 

We rate stamps from a MoneyStamp Rating of MSR1 to about MSR12 with a rating of MSR4 to MSR6 being the most frequent.  Our ratings can be found on the StampFinder.com website. Investors will find, through using these ratings, they can buy stamps with a MSR8 or MSR10 rating for the same discount from catalog as a lower rated stamp since most dealers are unaware of the appreciation rate of specific stamps, thus pricing them by a rule of thumb.   As the MoneyStamps methodology becomes better understood, we expect dealers to become more astute in their pricing. But for now, you can be the man with sight in a world of the blind.