Baseball card economics: should you trade your stocks for Bonds?

Every time slugger Barry Bonds gets closer to the all-time home run record, baseball card collectors smile a little wider. In 1987, Bonds’s rookie year, you could have bought his Fleer card for the price of a few Timbits. Nowadays it sells for upwards of $65 (U.S.) and with Bonds headed for the Hall of Fame, that figure seems destined to go up in the next decade.

His example proves that it is possible to make money in baseball cards — but don’t plan on becoming wealthy doing so. Despite the breathless news coverage of a few baseball cards that have changed hands for six-figure amounts, the reality is that most cards will be fortunate to maintain their original value.

One problem is too much supply. Several manufacturers now churn out baseball cards by the tens of thousands, making most cards far too common to fetch a premium. Rich Klein, an analyst for Beckett Inc., publishers of the hobby’s most popular price guides, says the glut was particularly acute from 1987 through 1992. “There were way too many cards produced overall.” You can now buy a 1990 Topps set — that’s 792 cards — for under $20 (Cdn.), considerably less than the cards cost when they were brand new.

The other big problem for collectors is the transaction costs charged by dealers. When you buy a card from a dealer, you pay his full marked-up price. But if you immediately turn around and sell the card to another dealer, you get far less than you paid for it. You also get less than the approximate retail prices — or “book values” — listed in collectors’ guides.

The size of this gap varies. If you’ve got a card that’s hot because the player is doing well on the field, you may get 95% of book value. On the other hand, if you’ve got a 20-year-old collection of hard-to-move common cards or incomplete sets, you would be lucky to get 20%.

So how do you get good value when you plonk down your money? Savvy collectors often buy promising rookies, hoping they’ll become Hall of Famers. Given the long odds against that happening, such cards are usually quite inexpensive. Mark McGwire’s first-year Topps card went for under a dollar in 1985; the Beckett guide lists it today for $50 (U.S.). Collectors this season have their eye on the Florida Marlins’ Miguel Cabrera. His card sells for about $5 (U.S.) and will shoot up if the 21-year-old right fielder lives up to his promise. If not, you’ve lost a few bucks — hardly reason to plunge out the window in despair.

If unproven rookies are penny stocks, then superstars are blue chip. “If you want something that is probably never going to go down,” Klein says, “pick the top-tier Hall of Famers, the guys who even people who aren’t sports fans have heard of.” There will always be a market for Mickey Mantle or Willie Mays — indeed, Mantle’s 1952 Topps rookie recently sold on eBay for $6,850 (U.S.). When buying a valuable card like this, Klein says, make sure it’s been graded by a third-party service such as Beckett Vintage Grading or Professional Sports Authenticator. These companies do not appraise value, but they authenticate and assess the card’s condition and issue the dealer a protective “slab” with an identifying label.

Steven Panet, owner of Fastball Sportscards in Toronto, agrees that stars from the 1950s and 1960s are a solid investment. “Vintage baseball always sells, because demand exceeds supply.” He says counterfeit sports cards do exist — “there are fake Bobby Orr rookies on eBay right now” — and acknowledges that grading removes that worry. However, he says many dealers use the supposed prestige of graded cards to sell them for more than they’re worth. “I think grading is way overhyped. A lot of people who buy graded cards will never see a return on their investment, because they’re overpriced. It’s artificial.” Panet insists that if you’re buying from a trusted dealer, you can get better value if you go with ungraded cards.

Either way, keep your expectations in check. “he best investment is a good collection,” says Klein. “Buy what you like. Remember, this is a disposable income hobby. If this is money you need to live on, don’t do it — pay your bills first.”

From the June 2004 issue.

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