eBusiness Weekly
Joseph Pompliano
When I think about investing, outside of your typical S&P 500 Index Fund or Apple Stock, I generally look for alternative assets with three main characteristics:
l Asymmetric returns (10x upside, 1x downside)
l Tier-1 co-investors participating in industry
l An emotionally attached & engaged community
For me, the most obvious choice right now is sports trading cards and collectibles.
The result?
I’m officially announcing an exclusive partnership with Collectable, a fractional share investment platform strictly for sports memorabilia and collectibles.
Here’s my thesis . . .
First, let’s start with an interesting quote from Ken Goldin, the founder of Goldin Auctions, a marketplace for collectibles and trading cards (think Sotheby’s for sports):
“There’s never been a time like this in the history of the business. I would bet that for every person who wanted a Michael Jordan rookie card in 2019, there’s 100 now.”
“This is now part of our culture.”
Why?
Well, it seems to be a combination of things.
Nostalgic collectors in their 30s and 40s are circling back to the hobby they loved as children. Investors are searching for inflation-hedged assets after more than $20 trillion in economic stimulus was allocated globally in 2020.
The most high-profile investors with large social audiences (think Gary Vaynerchuck, Logan Paul, Darren Rovell, etc.) are convincing an entire generation of the industry’s value. Oh yeah, don’t forget the “Covid-19” effect — otherwise known as stay-at-home boredom.
Simply put, the sports trading card and collectible market are on fire.
Even more interesting?
It’s not slowing down anytime soon.
In the last month alone, we’ve seen an increase in venture capital investment in the space. Grading company Collectors Universe was acquired by Wall Street veterans Steve Cohen and Dan Sundheim for just under US$1 billion. Goldin Auctions received a US$40 million investment from The Chernin Group and high-profile celebrities like Mark Cuban and Kevin Durant.
When I talk about Tier-1 investor participation, that’s what I mean.
Don’t forget, while everyone was making fun of Barstool Sports back in 2016, The Chernin Group was investing. With up to 50 percent of Barstool being acquired by Penn National, TCG will eventually turn their US$25 million investment into US$250 million.
Are those the guys you want to bet against?
I certainly don’t.
Now that we’ve established sustained consumer demand and increased venture capital investment, the real question becomes: Why use Collectable?
Here’s how I think about it . . .
You’ve probably all heard the stats by now: Since 2008, the PWCC 500 Index —which tracks trading card returns similar to the S&P 500 — has an ROI of 270 percent compared to 160 percent for the S&P 500.
That’s obviously great, but everyone forgets to mention the most important part.
The real value is concentrated at the top.
For example, when you look at the top 100 trading cards, rather than the top 500, the average return jumps to 392 percent vs. 270 percent.
When compared to the S&P 500’s 160 percent return, that’s obviously a massive difference.
The only problem?
These cards are valued anywhere from US$100 000 to more than $10 million, eliminating 99 percent of potential buyers from accessing those returns.
This is where collectable
comes in . . .
They make the top end of the market accessible to all through fractional share trading, creating affordable opportunities for investing in rare, iconic blue-chip assets previously reserved for wealthy insiders.
Here’s how their CEO Ezra Levine describes it:
“It’s the same concept applied on public financial markets. You can’t afford two trillion dollars to acquire Amazon outright, but you could probably afford one share for $200.”
Here’s how it works:
Collectable sources, authenticates, insures, and stores the most iconic sports cards and memorabilia from collectors, auction houses, and individuals worldwide.
Collectable creates real equity shares of the items through the Securities & Exchange Commission (SEC).
Collectable “IPOs” the sports cards and memorabilia, allowing you to purchase shares in the initial offering at a fraction of the total cost.
Investors are then provided ongoing liquidity through a secondary market.
The most impressive part?
In addition to ongoing liquidity through secondary market trading, Collectable will often receive buyout offers for various items, creating real liquidity events for shareholders.
Even better?
Collectable has IPO’d and exited three items in the last 6 months, providing investors a 70 percent return over an average holding period of 3 months. That’s insane.
In the end, trading cards and collectibles have something that only a few assets in the world can replicate — an emotionally attached & engaged community.
Price volatility will eventually settle. More venture capital will pour into the space. Institutional investment funds are being created as we speak. But in the end, the community is what matters. The winners of tomorrow realise that today.
The key to it all? The ability to access the most lucrative part of the market through collectable. — Huddle Up Newsletter (Online).
