This series of articles is intended to convince readers that stamp investing is not just for the wealthy, nor does it require expertise that can only be acquired through years of study. It is a securities-like investment, but it has a completely different risk profile. It is true that stamps are not as easy to buy and sell as stocks, but they are also less volatile in price and have a better performance profile than stocks. Part 2 of this series focuses on my research published in 2020, which made many of the same points I made in my previous study published in 1994. This previous work is worth considering, as it provides clear evidence that stamps are a valuable investment diversifier.
In 2020, I analyzed the recommendations I made in my 1994 guide, “Best Buys for Postage Stamps.” In that booklet, I featured over 16,000 stamps, showed their price appreciation history, and assigned a probability of value appreciation based on past results and other attributes. The results showed that the Mint stamps recommended in 1994 increased in value by 195.5% over the 25 years from 1993 to 2018, or 7.8% per year. Items that were not recommended also increased in value, but at a lower rate of 155% or 6.2% per year. These results verified two hypotheses. First, it proved that stamps worth $25 or more issued before 1950 were more likely to increase in value than those issued after that date. Second, it proved that analytical metrics could be applied to such stamps to find stamps that are likely to increase in value better than the average. What is particularly encouraging is that this occurred during a period when the prices of inexpensive stamps overall fell due to the Internet and a declining collector base. We now know that this decline did not apply to stamps with investment value.
The analysis also looked at the performance of used stamps for the same period from 1993 to 2018. Approximately 11,552 items were considered in the analysis. 4,164 recommended items, currently worth $13,807,210, returned 255.5%, or 10.2% per year. Approximately 7,388 items were not recommended. These items returned an average of 8.8% per year. This shows how strong the stamp market has been over the past 25 years. The lower average return compared to recommended stamps is clear evidence that using financial analysis metrics for stamps will give better results.
Used stamps overall outperformed new stamps (10.2% vs. 7.8%), as did the total value of stamps in the $25+ category ($29,026,877 used vs. $19,512,244 new). This reflects the fact that collecting used stamps is more popular than collecting new stamps. However, these early new stamps are much rarer and have more quality issues, so it makes sense that new stamps without hinges or with the right amount of gum are much harder to find. Thus, over time, it is likely that new stamps will significantly outperform used stamps.
Please note that we tend to use 10 or 25 year periods in many statistical measures. This is because pricing a million stamps, unused and used, is a massive task. Thus, catalogs such as Scott’s may take 5 to 10 years between updates. This means that if you are buying a specific high-value stamp, it is worth checking websites such as stampauctionnetwork.com for auction results for similar items. Some stamps are very rare and may not trade publicly for decades. Thus, a 5 or 10 year period with no price change is not in itself a negative. Again, confirmation of auction results, or lack thereof, is an important valuation consideration.
