Last week, an anonymous buyer, bidding by telephone at Sotheby’s on the Upper East Side in New York, paid a record $9.5 million for a British Guiana One-Cent Magenta postage stamp from 1856.
The winning bid was almost four times the previous record auction price for a single stamp — 2.87 million Swiss francs (about $2.2 million) set back in 1996. It was also a far cry from the $35,000 Utica, N.Y.-based textile magnate Arthur Hind paid for the stamp back in 1922.
David Beech, longtime curator of stamps at the British Library, called the stamp the “Mona Lisa” of the world’s stamps. And after collecting a 20% commission on the sale, it’s no wonder David Redden, Sotheby’s vice chairman, called the auction “a truly great moment for the world of stamp collecting.”
Stamps as an Investment
If you’re like most retail investors, you’ve probably never thought of stamps as an investment.
So you’ll also be surprised to learn that stamps are billionaire bond king Bill Gross’s favorite asset class.
Over the course of his lifetime, Gross has spent reportedly between $50 million and $100 million buying stamps. That’s not an insignificant chunk of his $2.2 billion fortune.
Rare stamps also have generated Bill Gross some terrific investment returns. At a charity auction in 2010, Gross sold a small part of his stamp collection for 4x his cost, and has called investing in rare stamps “better than the stock market.”
Nor is Gross alone in looking at rare stamps as a place to invest.
At least one third of the estimated 60 million stamp collectors across the globe are Chinese. Another third are based elsewhere in Asia. AccordingThe Hurun Report, 64% of Chinese millionaires invest in luxury goods, primarily in rare stamps. That makes it very possible that the buyer of the British Guiana One-Cent Magenta was from China — and that the stamp’s new home is nearer to Beijing than to Boston.
Why Invest in Stamps
Rare stamps offer a triple play of diversification, stability and significant upside potential. Rare stamps have little correlation to any publicly traded securities market. They are thankfully immune from the vagaries of the stock markets, offering slow steady returns over time. And like the Energizer bunny, the price of rare stamps just keeps going and going — consistently appreciating in value.
And stamp investing has come a long way.
Rare stamps feature prominently in the Knight Frank Luxury Goods Index. Rare stamps were the second-best-performing luxury asset class over the 10 years through Q3 2013. Only classic cars fared better.
Nicholas Vardy is currently editor of the monthly investment newsletter, The Alpha Investor Letter, which provides longer-term global investments. He also writes two weekly trading services, Triple Digit Trader and Bull Market Alert, which focus on making short-term profits in the hottest markets in the world.