Covering the Spread 8: In Layman’s Terms

Bonjour CBSI (and everyone else) and welcome to Covering the Spread!  I have had a lot of friends and family reading my articles and telling me that the numbers are interesting but they don't really understand all the background information, so this week we have a special edition.  I will be breaking down everything a non-collector needs to know to start investing in comic books.  Don't worry though, if you already know all this feel free to skip ahead to the section marked “Analysis” and we'll still do our normal breakdown.

Why comic books?

First things first, a question I find a lot of people asking is why would you choose to invest in comic books rather than something more traditional like a CD or the stock market.  Well that answer can be very personal to you.  For me, and I'm sure many of those who do, my interest in comic books initially had nothing to do with investment.  I was introduced to comics when an LCS (Local Comic Shop) was handing out free issues at the opening weekend of Spider-Man.  I didn't love all the issues I was given but one issue really wowed me.  Fantastic Four 60.

The issue itself was fairly mundane, but Mike Weiringo's art is incredible.  I went down to a local store (shout out to Globe News) and bought the next several issues and both the writing and art continued to improve.  For me this is the biggest reason to invest in comic books.  If the company you bought stock in goes bankrupt, the stock is worthless.  You can always appreciate a comic book for what it is.

On a more monetary note most CD's I see available online at the moment have an interest rate around 3%.  To contrast, over much longer periods in the stock market most estimates say that if you invest well you will make about 7%.  As far as comic books go there will be a much wider range of results, but using the books I cover in Issue 5 as examples we have an average ROI (return on investment) of 48%!

In addition my method of investment doesn't depend on prices for anything rising, unlike investing in stock.  How does that work? Don't worry we'll get there in a bit!

The Comic Book Market Explained

Before we get into my investment methods you need to have a basic understanding of the comic book market.  This requires me condensing a lot of history into a few paragraphs but hopefully I can do a good job of giving everyone a basic understanding.

There are always three sides to the comic book market.  First you have the reading side.  This is the side of the market that ensures every issue has at least some amount of value.  No matter how “unimportant” an issue may be someone will probably give you a dollar to have something to read.

Next there is the collector market.  This is the middle ground between the other two groups.  They may also be a reader but collectors usually have a more specific focus.  They may collect a “run” (every issue of a series from beginning to end) or just “key issues” (usually a characters first appearance or some important event in the story).

Finally we have the investment market, often referred to a speculators.  These are the people who are in it for the money.  They often focus on “key issues” also but there is much more emphasis on art.  Issues with no important events inside of them often command high prices based on the cover art alone.  After all at the end of the day investors are just art dealers without all the prestige.

Supergirl and the Legion of Super-Heroes 23 variant

Available for the low-low price of $800

If we are going to be investing, then our focus will primarily be on the speculation market.  Think of every copy of an issue you buy like a share in a stock.  If you want to sell it, there has to be someone willing to buy.  That is the biggest risk in this type of investment.

With that said not all issues are created equal, and I mean that literally!  The most important thing to take into account is the “grade” of the comic.  This is a term that refers to the overall condition the book is in. For a long time comic books were graded on a scale starting with “Poor” all the way up to “Near Mint”.  As the market grew and issues gained more and more value there started to be even more division with people grading issues Near Mint Minus or Near Mint Plus.  However grading comic books is subjective and there was always debate over what the correct grade for any given issue was.

Thus CGC was born.  The idea behind the company was simple.  They would be an impartial judge of the quality of comic books.  Because they had no stake in what the value of the comics were, they could collect a small fee for their services and assign a grade to any issue sent to them.  They would then encapsulate the issue in a hard plastic case to preserve it's condition in the future.  This was a turning point in the comic book market.  There was soon another division into 2 sectors – the “raw” (ungraded) market, and the “slab” (graded) market.  This is where the theory behind this article comes into play.

The Theory Behind the Spread:

Our goal here is to find issues where there is a large difference in value for a given issue between the “raw” (ungraded) market and the “slabbed” (graded) one.  I call the difference in price between the two “the spread”.  We will do this by estimating what grade the “raw” books will receive once they are graded.  We are only going to focus on raw books that are “NM” (near mint). I estimate that out of every 10 “NM” copies you buy from eBay, if you submit them for grading you will receive grades between 9.2 and 9.8.  Here is a table with some example grades and prices for reference:

9.8 Av Price 9.6 Av Price 9.4 Av Price 9.2 Av Price
155 85 75 46
2 copies 3 copies 4 Copies 1 Copy Total Value
310 255 300 46 911

As you can see we will take the average price of an issue with that grade and multiply it by the number of copies I estimate we will have.  Then we add up the value of all those issues to get the total value of all 10 graded copies.

Why do I suggest 10 copies?  Unless you are a professional grader it is very difficult to predict exactly what grade an individual book is going to receive.  By purchasing 10 copies we can somewhat insulate ourselves from the risk of an issue been graded very low (like the 9.2 copy I assume we will end up with) by offsetting it with higher grade copies.  Perhaps even more important is shipping.  Shipping a single comic book to be graded is extremely expensive but by bundling books together you can save yourself a lot of money.

So at that point we know what our books will be worth after they have been graded, but to know if they are a good investment or not we need to analyze all the costs in having them graded.

Average Raw Price 30.99
10 Copies 309.98
Shipping Fees (EST) 100
Grading Fees (EST) 180
Selling Fees 91.10
Total Costs 680.98

Using this example you can see the first entry is the average price you will pay for a raw (ungraded) comic.  The next entry is simply multiplying that average price by 10 to get an estimate of how much 10 copies of this issue would cost us.  The next two rows show an estimate of our shipping costs as well as an estimate of what we will pay to have them graded by CGC.  Then I include a 10% fee for selling them online (the standard selling fee on eBay). Finally we will have our Total Costs which is pretty self explanatory but the one thing of note is that Selling Fees are not an upfront cost but because they should still be subtracted from your final value I include them in this table.

The only other thing we'll need to explain ahead of time is pressing.  Pressing is exactly what it sounds like.  Many businesses, CGC Included, will use some type of industrial press to flatten out a comic book.  This process can remove things like minor bends and ripples, thus increasing the grade (and value) of a book.

Analysis:

Well now that everyone is caught up let's move on to an example.

New Mutants 98

New Mutants 98:

Welcome back to everyone who has had their eyes glazed over for the majority of the article.  Here, we have a book that is a frequent target of investors.  The first appearance of Deadpool is something that many collectors would love to add to their collection, but is it actually a good investment?

Without Pressing:

Average Raw Price 269.72
10 Copies 2697.21
Shipping Fees (EST) 100
Grading Fees (EST) 585
Selling Fees 455.82
Total Costs 3883.03

 

9.8 Av Price 9.6 Av Price 9.4 Av Price 9.2 Av Price
814.78 406.32 347.31 320.43
2 Copies 3 Copies 4 Copies 1 Copy Total Value
1629.56 1218.96 1389.24 320.43 4558.19

Our upfront cost for this would be $3427.21 so it's certainly not the cheapest investment in the world.  But with our profits landing at $720.16 that might be worthwhile.  That would put the spread at +72.02, or for those here to learn today a profit of about $72 on every copy of this book you would buy.  For the investment buffs among us that is an ROI of 21%.  Honestly 21% is not the best return on investment comics can offer you, but this issue is one of the most secure investments you will find.  The market always wants copies of this issue and you will be able to sell them quickly.

Normally this would be the part where I would discuss how pressing will affect your investment, but in the interest of keeping this article from being a 2 hour read, my advice is to skip the pressing, it's too expensive on this book.

Thor 337 1st Beta Ray Bill

Thor 337

Where else should we be investing our money? How about the first appearance of Beta Ray Bill?  Chris Hemsworth's contract is up after Avengers 4 hits theaters next year.  While there's always a possibility that they will renegotiate I think it's more likely that Marvel will want a new team of heroes to take them forward into the future.  An easy way to do that would be to have someone else take on the mantle of Thor.

Without Pressing:

Average Raw Price 53.04
10 Copies 530.04
Shipping Fees (EST) 100
Grading Fees (EST) 180
Selling Fees 134.77
Total Costs 945.17

 

9.8 Av Price 9.6 Av Price 9.4 Av Price 9.2 Av Price
289.79 120.05 85.62 65.44
2 Copies 3 Copies 4 Copies 1 Copy Total Value
579.58 360.15 342.48 65.44 1347.65

Here we would have an upfront investment of $810.40 and profits of $402.48.  That would be a spread of +40.24 and ROI of 49%!  Now that's more like it!  Full disclosure, I did exclude one auction from my pricing estimates for raw copies.  The issue in question went for over $100 more than the average raw copy and I felt that it was such an outlier it would throw off our analysis.

With Pressing:

Average Raw Price 53.04
10 Copies 530.41
Shipping Fees (EST) 100
Grading Fees (EST) 180
Pressing Fees (EST) 120
Selling Fees 164.09
Total Costs 1094.49

 

9.8 Av Price 9.6 Av Price 9.4 Av Price
289.79 120.05 85.62
3 Copies 5 Copies 2 Copies Total Value:
869.37 600.25 171.24 1640.86

We can get all 10 of our copies pressed for just $120 here which is enough to add $293.21 in value.  That would put our upfront investment at $930.40 and our profits at $546.36.  That's a return of 58% and a spread of +54.63.  What's really great about this book and in fact most of the issues I recommend, is that there is even more potential here.  If Beta Ray Bill is announced to be in the MCU I predict these prices will double overnight.

Wrap Up:

Well everyone that's what I have for you today.  I hope I have done a good job of explaining my articles and why investing in comic books is something everyone should be interested in.  If you have any questions please leave them in the comments below I'll be happy to answer them.  More importantly if you're one of our regular readers and you want to explain to your significant other, friends or whoever else why you invest in comic books share this article with them!  The more the merrier here at CBSI.

Thanks as always to the Comic Collateral App for our pricing data, and I will see you all next week for a normal article!

 

8 comments

  • Excellent post! Good job with it!

  • Dan Piercy

    Not only did I read this article, but I enjoyed it!

  • Glad to see that someone else loves the Weiringo/Waid run of Fantastic Four. I bought all of the issues as they were released and just last year had Waid sign a few issues for me including 60. I never got to meet Weiringo sadly but I think he drew the Fantastic Four better than anybody.

  • Brian W

    Great article! Appreciate all of the work and effort you put into this

  • Nice article. Thanks for taking the time. But I need to say that while the numbers make sense, to a degree they are unrealistic. Finding NM 98, Thor 337, or for that matter any bronze/copper key and being able to hit 9.8s at a 20% clip just isn’t possible. Nor is 9.6 at a 30% clip – but that is more likely than 9.8 at 20%. That’s the reason that 9.8 sell for double the 9.6 in both of those books. That’s why dealers freely sell NM copies ungraded, because they know they are not 9.8s. 9.6 and up is what is getting sent in to CGC. In my experience, and speaking to other dealers who concur, NM 87, 98, Thor 337, ASM 300, and most other keys of the era are being double-scrutinized by CGC right now as well. There are very few 9.8s being given on these. And in all honesty people who can’t tell the difference in 9.2 and 9.8 should be getting a second opinion, not sending to CGC to see what their opinion is. And as far as the pressing, I don’t think any books other than brand new moderns, or golden age books where pressing doesn’t improve the grade, should be sent for grading without being pressed. Thanks for the article, definitely good food for thought.

    • I did stress in my first article and I guess I should have reiterated here but scrutinizing the books you purchase if of course very important. I’m not by any means saying to buy anything listed on eBay as NM and just assume you’re fine. I am saying out of every 10 books THAT YOU THINK HAVE A SHOT AT 9.8 I would expect to see these results. Perhaps you’ve never gotten back a 9.2 that you expected to grade higher, if so congrats! I would never fault anyone for just pressing all the books they send in but again I’m not recommending anyone send in a book that they think will grade 9.2 in the first place so if you think everything you’re sending already has a shot at 9.8 and pressing will only have as much of an impact as I’m projecting then it wouldn’t always be worth it.
      Thanks for the feedback I will be sure to always reiterate the importance of grading the books yourself before purchase in future articles

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