I am always a little surprised about how much sports memorabilia can go for. Can you imagine owning a Joe Montana signed Super Bowl ball? It would probably go for thousands! I am really fascinated with the idea collectibles as an investment class. That’s why I decided to explore the topic a little bit more. I’m going to discuss a few strategies one might use to invest in sports memorabilia.
Why Invest In Sports Memorabilia
A few weeks ago, I wrote about how the right collectibles can be great investments. They are less correlated with the equity markets, yet have the potential to generate similar or superior returns.
One way I thought about investing in collectibles was through sports memorabilia, specifically football (American football).
I love everything about football. The excitement, the adrenaline rush of watching your team win….and also the thrill of winning on your fantasy team. And yes, my fantasy team sucked this year; injuries screwed me over!
For a while I’ve been thinking spending a little money to dabble in sports memorabilia.
1. There will always be a market: As long as there is sports, people will be willing to buy signed jerseys, helmets, footballs, and other items. Sports brings out a lot of nostalgia and emotions.
Maybe it’s because your dad brought you to watch the 49ers when you were younger. Or maybe it’s because you went to an awesome game with friends. These memories create great experiences and further solidify fans’ connection to the sport and memorabilia market.
2. Many buyers buy with their hearts: While many people are buying sports memorabilia with their heart, an astute investor would be buying with his head after careful analysis. Collectibles are funny items to invest in.
They don’t pay dividends or provide some sort of cash flow. As a result, we can’t apply some sort of earnings multiple or a dividend yield like we can with stocks and bonds. The only way to make money is to sell it to someone else for a higher price!
Instead of actually focusing on the fundamentals of a particular collection vintage, most people buy sports memorabilia out of emotion. If someone has a level head when looking at a list of memorabilia, there must be great opportunities out there!
3 Strategies To Invest In Memorabilia
I’m a firm believer in investing in what you know. As I mentioned before, I love playing fantasy football. I am up to date constantly about players like who is hot and who is not. In addition, I love keeping up with the stats. Overall, I think I have a decent knowledge about the market.
Here are three strategies I’ve considered to invest in football memorabilia:
1. Invest In Rookies (High Risk)
The first strategy I had in mind is to invest in rookies, specifically high first round picks.
This is very risky because it’s rare that a rookie (even a first round pick) will have significant contribution to their team. However, the rewards can be enormous. Think about how much you could have made with a Peyton Manning signed jersey or helmet when he was selected as the number 1 overall pick back in 1998.
Okay, that example is extreme because he turned out to be one of the best quarterbacks of all time.
Given the high risk with investing in rookies, here are two ways I’ve thought about managing the uncertainty:
- If he sucks in his first eight games, don’t even consider the player. 8 games is half the regular season. If they haven’t turned things around by then, they probably suck. Bail out and keep watching, they might be better next season.
- Some guys have a good rookie season and then it’s all downhill from there (call it beginner’s luck). If the rookie begins to deteriorate in year 2, consider selling out. I’m looking at RG3 in this scenario. The guy had a magnificent rookie season, but after that it was downhill.
Alright let’s take a look and see how this might play out with a little example with Dak Prescott.
So, just a little background about the guy before we get started for our non-sports readers. The Dallas Cowboys drafted him in the 4th round of the 2016 draft. The Cowboys starting quarterback, Tony Romo, suffered an injury in a preseason game with the Seahawks.
As a result, Dak filled in and basically won the starting job. The Cowboys lost their first game with the Giants, but they’ve since rallied and won 11 straight games.
I pulled some of Dak’s signed (and authenticated) helmet sales over the past two months from Ebay using the sold listings feature. Overall, there has been a general upward (although volatile) trend in his signed helmet sales from mid November through mid December. However, the last two sales have cooled off a little.
As you can see above, there a large variability between his signed helmet sales over the past two months. The guy has had a stellar rookie campaign by almost any standard. Given Tony Romo’s age and propensity for injury, I think Dak will be the future franchise QB of the Cowboys.
Now I’m not saying he’s bound for the hall of fame after one season, but he’s certainly on the right track. What do you think his signed helmet would be worth in 5 years if he continues winning at this pace?
Nevertheless, investing in rookies can be a very high risk gamble. Many top first round picks have gone bust: Ryan Leaf, RGIII, and Johnny Manziel to name a few. And even late round picks (or even undrafted players) have achieved first tier elite status. So the game is admittedly a little random, which can be scary.
2. Invest In Younger Proven Veterans
Investing in proven veterans mid-way through their career can be a much safer strategy than rookies. This way it’s not “make it or bust” like with rookies. These guys are still relatively young, but have proven they can hang with the best. I think someone like Russell Wilson or Odell Beckham would fall into this category.
Anyways, my thinking with this strategy is that the player’s value is substantially derisked. He is for sure a franchise receiver, running back, quarterback, or whatever position. This way you can still ride the greatness for the second half of their career. Just cross your fingers for no career ending injuries.
3. Hall Of Fame Play
Entering the Hall of Fame is one of the greatest dreams for any NFL player. Very few college players ever make it to the pros and find success. And even fewer out of that pool find the elite status of being called a HOF player.
I don’t have any statistics on this, but I would wager that several players might see a boost in their memorabilia values once they get into the hall of fame.
For example, Ladainian Tomlinson is pretty much a 100% shoo in to enter the hall of fame in 2017. Check out his stats on NFL.com; he had eight 1,000+ yard rushing seasons! That’s some great fantasy production!
Another opportunity might be Terrell Davis who has been blocked from the Hall of Fame several times. He had a very short (but still great) career in the league. Maybe his memorabilia value would go up if/when he gets into the HOF!
I’m still a little up on the air between investing in sports memorabilia. My biggest fear is someone I pick will start sucking or have some sort of career ending injury. Maybe I should just buy memorabilia for players on my favorite team instead!
Readers, what do you think about my strategies to invest in sports memorabilia? Are they too crazy? Do any of you own sports memorabilia that have greatly appreciated in value?