The Pandemic and its Favourite Alternative Asset.

Investments come in all different shapes and sizes. One alternative asset that seems to be on the rise in the U.S. and around the world, despite the sharpest economic contraction in modern history, are sports trading cards.

Covid-19 saw unemployment in the U.S. rise from historic lows of 3.5% in February to a record peak of 14.8% in April, and major stock market indexes such as the S&P500 and the Dow Jones have fought hard to recover since the early 2020 crash. However, over the past year, sports trading cards have seen huge, sustained increases in popularity, breaking records in the process. Examples of this soaring popularity throughout 2020 include Lebron James’ rookie card selling for $1.8 million at auction, whilst a Mike Trout baseball card sold for $3.84 million. So, what is causing this demand for sports trading cards and how do they differ from traditional investments?

Brief History

Trading cards tie together nostalgia, art and investment potential. In the past, sports trading cards were widespread. In the 1980’s, shops dedicated solely to memorabilia and trading cards were common sight in the U.S. However, in the 1990’s, over supply made many cards worthless, and coupled with card fraud, lead to deterred customers and a decline in popularity.

Today’s Market Boom

The recent increase in demand today seems to be driven by those who are rediscovering their 1980’s hobbies and have re-established their love for collecting sport cards. The children of the 1980’s are now in their 40’s and 50’s. Thus, their disposable income is far greater than their past pocket money, meaning they can buy cards they dreamt of owning as kids. This explains the dramatic increased in the demand of sporting cards today.

Furthermore, as opposed to the 1990’s, modern day card producers today have exclusive deals with sports leagues (e.g. Panini makes NBA trading cards). Plus, suppliers have assured collectors that they have learnt from their mistakes, therefore card supply will be much more limited. Additionally, the market has revitalised due to the introduction of online auctions. Platforms such as eBay allow huge volumes of cards to be bought and sold, whilst increasing the demand for such cards as they can be bought from anywhere around the world. In addition, last year popular sneaker buying and selling site StockX launched their own platform to facilitate the trading of cards. Certain celebrities have also helped to increase demand, with one notable individual being entrepreneur and internet personality Gary Veynerchuk, who is outwardly optimistic about the future for the sports card market to his large fan base online. So, when the pandemic hit, and people were forced to stay at home, these established online sites, alongside the cash sports card enthusiasts possessed, led to an acceleration in an already re-emerging market for sports cards.

In 2019, pre-pandemic, eBay reported more than $600 million in card sales, a 40% rise since 2016. Then, in 2020, with sports fans being forced to watch old games and reminisce whilst stuck at home, coupled with the release of the hugely popular ‘The Last Dance’ documentary which followed basketball legend Michael Jordan, figures for volume of cards being bought and sold have further broken records. From March to May 2020, the volume of sales on eBay were 92% higher than they were in the last three months of 2019. The late 2010’s saw a boost in popularity, but the pandemic has evidently accelerated this trend.

How do Sports Cards Compare to More Common Investment Options?

Deciding where to invest your money can be a difficult decision, regardless of the asset class. There is always a trade-off to be made between ROI (return on investment), and the amount of risk you are willing to take. The more risk, the more chance you have to lose all your money, but the greater chance you have at seeing the high percentage returns investors dream of.

So, just like with a small start-up company’s IPO, a new player entering the sports league presents investors with cards that have great opportunity and great risk. Akin to stocks a small minority of rookie cards will go on to be very valuable, an example stock could be Amazon, with the card equivalent being Giannis Antetokounmpo’s, the current MVP of the NBA, rookie card.

The overall opportunity in sports cards is best shown through the PWCC 500 Index, which is essentially the S&P 500 for trading cards. It has reported a 12-year ROI of 270% compared to just 102% for the S&P 500. With such great returns, investors should consider whether this growth will continue in the future – GaryVee is certain that many cards are still widely undervalued.

End Notes

With the end of the pandemic still not in sight it’s difficult to say whether the industry will keep growing, or if this rise in popularity will fade as it once did. One thing that is for sure it that these cards bring a form of personal connection to investing that can’t be found elsewhere.