The Move from Growth to Value
Today I’d like to evaluate a sudden shift in the card market, specifically the basketball market. In my most recent posts about Lebron, Kobe, and Jordan’s rookie cards, I outlined the sudden surge in their cards. There has been a direct correlation with the drop in most recent hot young rookies such as Luka, Trae, Ja, Zion, and more. More simply put, there has been outflows from the young rookies with high pop and a LARGE inflow for the already proven vets with low pop. What has caused this shift? I’ll be breaking down some thoughts below.
Big money has entered the market and their comparative “small splash” of money they have so far thrown in the market has created a seismic wave. As many may have heard through the grapevine, large money managers/funds are starting to snatch up high-end cards with low supply via auctions like @goldinauctions, creating new record sale prices each time @kengoldin brings rare cards to his auctions. They are seeing the insane returns in the card market and want a piece of the action. They are literally allocating a percentage of their holding solely for cards. This makes sense as the card market has outperformed the S&P500/NASDAQ by an insane amount. For example, the NASDAQ is up 40.65% over a year period, and a PSA 10 Lebron Topps Chrome RC is up 784%! The only other stock that came close to outdoing that card was Tesla which gained an amazing 725% return (very rare to come by).
Not only are these money managers buying up all the hard to come by cards via auction houses, they are also snatching up pristine cards with low pop which has caused a massive ripple affect in lower graded cards. For example, as outlined in my last post, the MJ Fleer ‘86 RC PSA 8 is up 119% in just one month. There are rarely any auctions for his PSA 9/10 on eBay, so people are picking any grade they can of that card. Another example is the Lebron PSA 10s which have more pop, so more are listed on @eBay. Each day it seems like there are new highs for this card — same goes for the Kobe Topps Chrome PSA 9/10.
Why not the surging stars? One major reason is the pop. There are about 15,000+ Luka PSA 10s versus 2,000 Lebron PSA 10s. If they can get as many Lebron’s as they can, they essentially control the market as they would own majority of the outstanding supply. The other reason they aren’t buying young stars like Luka and Trae is there are obviously more inherent risk by holding cards like that. Sure, they may be grabbing the rarer cards of their such as an NT RPA or a logo man, but not the abundant amount of base cards out there because it just wouldn’t make sense to hold hundreds or thousands of those cards. This in affect has driven down the price for the Prizm base cards, and we have seen value turn into growth quickly.
Lastly, over the past year or so the young stars have been priced for perfection and have mostly outperformed the vets. This gives the card very little room to grow and puts pressure on the players to perform to the card’s intrinsic value — any hiccup and the card tanks. The overall key is supply, when there is already heavy demand and the supply dries up quickly, prices will go parabolic which we have witnessed this past month for vets. So, will we see this shift stick with high pop cards getting pushed aside and more low pop cards getting the love they deserve? Throw your thoughts below.
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