Coin Collecting Strategies – The Concept of Value in the Acquisition of Coin Rarities

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By Bruce Smith, Senior Portfolio Director and Numismatic WriterBlanchard and Company....
 

There is a misconception in the minds of many investors and collectors that they should be looking for a “deal.”

I’d like to confront this ideology – a dangerous one – head on in order to help coin enthusiasts engage in a non-stop pursuit of value, rather than a bargain. While it may seem counter-intuitive, I believe this collecting philosophy is both logical and smart when it comes to finding the best coins with the greatest potential for appreciation

First off, in the real investment world, there are few, if any, real bargains, particularly when it comes to rare coins. Markets are typically efficient and bring assets to their place in time. The smartest and most successful investors of all time, in any market, have achieved that status by pursuing smart, value-based acquisitions. Bargains for them, especially in the tangible asset markets, are more akin to the opportunity to own something important and valuable. There’s a reason I state it that way. Opportunity is worthy of an investment to the degree it represents an uncommon chance to acquire something valuable and historic. This is particularly true of rare coins as there is a limited supply and a high demand.

Resourced collectors always seek the very best. They recognize these assets endure. Just reference the most famous collections of all time in any market. What’s the unalterable theme? Quality. Always quality. These collectors never skimp on pricing or competing for the chance at supreme quality. Quality inspires, quality excites and quality wins.

Let’s consider the fine art world as an example. Why do ultra-rich, and presumably ultra-smart, collectors seem to pay record prices for the greatest works of art year after year? VALUE. They are not looking for bargains – they are looking for ownership chances, and long-term legacy wealth.

Rare things and historically significant things with great demand all have value. Art collectors who gladly pay $140 million for a piece of art that last sold for $100 million do so because it pays off. It pays off monetarily, yes, but it also pays off in intangible ways in terms of legacy, family wealth and generational wealth and in psychological ways in terms of personal satisfaction. These kinds of people have a living tie to history once they own such.

Again, to have a chance to own history and a long-standing value is the real opportunity. Those who are reluctant to invest in an artifact at or above its true and real time market value usually lose in the end. There is a false sense of security in skimping, and too little focus on the real value of valuable things. Rather than “Carpe Diem!” some other less prudent mantra rings inside their minds. This can destroy the ability to build value and long-term wealth, let alone create true satisfaction. World class acquisitions usually have a very narrow window of opportunity for obtaining them.

Investors and collectors who appreciate value also appreciate the process and the relationships the process brings. Recently more than one rare Half Dollar(s) traded for an historic price. The Pogue Collection realized a new record for a 1797 Half Dollar, near the $1.5 million mark, and two varieties of the 1796 Half Dollar hit new record highs as well (the 15 star and 16 star respectively). Each were at previous highs just a handful of years ago and each surpassed those records in dramatic fashion.

The 15 star price record was topped by a full $200,000 and the 16 star variety nearly doubled its previous record of $470,000. Yet, the numbers are irrelevant because it’s likely that by the time you read this those specie will have traded even higher. Why? These historically important specie were secured by a long-time market player who was willing to invest at a new record level, knowing clearly that these would trade much higher even in a short period of time.

Many if not most of the public newsworthy sales are dealer acquisitions, also known as “primary” acquisitions in the industry. These dealers are securing assets to be resold immediately at much higher numbers to a serious value-based collector who wants the piece for their collection. They have no problem making the investment because they know the significance of the piece.

What value really is in the world of rare coins and tangible assets is just that, value. I cannot say it enough, because some people are confused about value.

Currencies, for example, take moves and swings continually. Fiat currencies are far more random than tangible assets and gold related assets. Yet people are willing to invest in these currencies. Often they look for a market bottom to buy in on, only to find a new bottom awaits them. They can wake up one morning and realize a massive devaluation in a currency they had obtained at what they thought was a bargain level. In the high-end rare coin market, this rarely happens.

Value runs like a river through the gyrations of most market cycles. Singularly-important rare coins tend to retain and grow in value over time, so I counsel clients not to be afraid to invest in and secure such assets. Collectors are far more likely to fail by investing in lesser items that don’t significantly increase in price. I see it every day and have seen it too often for two decades now. The smartest and most successful investors I represent know value and go after it.

As collectors, are there moments when we have a chance to seek out and find an undervalued asset in the rare coin market? Absolutely. Undervalued, however, may not and often does not correspond to how any publically listed price guide may value a rarity.

Those guides, I can tell you without hesitation, especially with regard to the most important coins, can be off by miles.

Undervalued in the high-end rare market simply means one has the chance to secure something that has a huge potential to grow going forward, more than most other coins. The asset’s future value is unrealized, therefore, it’s below its ultimate value. This is a critically important idea here. Collectors should invest in things that are now below their coming future value. The best assets will show their direction for decades on end.

Tips central to the value pursuit.

A smart investor-collector focuses efforts on coins that, upon their individual merits, represent a smart value opportunity. Always buy the coin in the slab – not what the slab says is in it.

As any long-term successful investor knows, price is not always the indicator of success. You must go inside the numbers, specific to the situation, to find the real value opportunity. Warren Buffet has bought massively expensive lots of stock, irrespective of pricing, based on his rigorous evaluation of the essential value-based realities pertinent to his buy and based on the long-term horizon and forecast.

He searches for value first before ever considering price. He knows that buying cheap is no sure bet on success. The real thing, as was proved with Coke, when he bet the farm on that one stock early on, is value. If the asset has the merits, go get it and pay for it. This is how the headlines unfold time and again. This is why those who began 40 years ago in rarities at the highest level and who have now paid the new record price nearly every time for a real asset of value, have seen enormous increases in portfolio wealth and legacy wealth.

The decades long pursuit of quality and value became their recipe for success. Bargain hunting did not even play a role. If any true such thing surfaces while in the pursuit of value, great, but value is primary, fundamental, essential and non-negotiable. Value is sought because it gives leverage when unloaded, as well. People will compete for value, and they do it eagerly and with great enthusiasm.

Find the history, invest in the story, build a mutually trusting relationship with a knowledge- and quality-based associate, and go all in when and wherever historically important specie arise. Without question, this is the most proven way to succeed in this market. Other savvy collectors will come running when a singular specie returns to the market. Bargain hunters will be hunted by other bargain hunters. Collectors typically attract what they value. Value is the roadmap.

About Bruce Smith

bruce_smiithFor nearly 20 years, Bruce Smith has specialized in acquiring significant rare coin, precious metals and tangible asset investments for his clients, applying research and analysis to manage some of the most extensive and compelling portfolios in numismatics.

He specializes in coins of significant historical importance and high value, placing, among others, the 1913 Liberty Head V Nickel, for over $3 million.

About Blanchard & Co

Blanchard and Company, Inc., was founded upon and continues to be driven by the belief that precious metals and rare coins possess unique qualities that make them attractive holdings for any long-term investment strategy.

The hard work of two Blanchard visionaries — Jim Blanchard and Donald Doyle — helped pave the way for the millions of investors today who leverage these tangible assets to enhance and protect their wealth.

We are unequaled in terms of breadth of experience, personal service, inventory and expertise. More than 85 experienced and knowledgeable professionals focus on serving the long-term financial interests of our clients.

When investing in Blanchard rare coins, you are not merely acquiring an advantageous portfolio asset. You are also engaging in an investment relationship built upon the strongest and most reputable of cornerstones.

Our meticulous coin acquisition is unrivaled, and it reflects the union of our superior business principles and impeccable rare coin selection methods. We proudly offer coins handpicked by John Albanese, who is the top numismatist and coin grader working in the rare coin market today.
 

1 Comment on "Coin Collecting Strategies – The Concept of Value in the Acquisition of Coin Rarities"

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  1. J Meade says:

    This is, I think, very true. Quality above all.

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