SUMMARY

“Value investing is an investment paradigm that involves buying securities that appear underpriced by some form of fundamental analysis.” - Wikipedia

 

Does the concept of value investing exist for comic books?

Instead of spreading limited capital over a bundle of high risk lottery ticket comic books, it is possible that an inefficiency in pricing exists in the current market for a single book that can offer higher and more reliable returns.  A potential strategy is through undervalued grades.

 

INEFFICIENT MARKET

For the purposes of this article, we will examine the first appearance of the Punisher in Amazing Spider-Man #129 (1974). If we look at the Fair Market Value vs CGC grade data for Amazing Spider-Man #129, we observe the following:

From this chart, we can observe an exponential curve in CGC grade versus the market value of ASM #129. While the overall pricing data fits the curve, there are grades that drift above and below the curve. This represents an inefficiency in the willingness to pay for marginally improved condition of a book.  Specifically, 4.0 was selling noticeably above the expected value.  At the time of analysis, the fair market value of 4.0 was $625; with theoretical value closer to $575.

On the other side of the coin, we see that 2.5 and 5.5 are selling below the curve. At the initial time of analysis, the price for a 2.5 was $400, but it should be selling for $437.50.  Interestingly, the price has since increased to $450.

Likewise, 5.5 sells for $625, but it should be closer to $712.50. This represents a 9.6% undervaluation.

Due to the subjective nature of the condition and grades, it is also important to compare it to the overall population that exists for each grade. This allows for a more accurate picture of availability in the various grades. In the following chart, we observe the Fair Market Value vs CGC census.

From this, we can see that the books in the 84.1 top percentile is the most undervalued. This 84.1% corresponds with CGC 5.5. In addition, we see that the previously identified inefficiency of the 2.5 grade/price has almost blended into the surrounding lower grading range of 1.8-3.5, which represent 99.7% to 97.1%. Interestingly, the curve is almost vertical in this lower range. What does this mean? Perhaps the next example can shed light.

 

CASE EXAMPLE #2

Let’s examine the current valuation for another key comic book: Fantastic Four #48 (1966), the first appearance of Silver Surfer and Galactus.

Based on the CGC grade vs Fair Market Value, the candidates for undervaluation are 5.5 and 6.5. To double check, we compare this to the CGC census to account for overall availability.

This confirms the undervaluation of 5.5 and 6.5.  At the time of analysis, the fair market values were $1,100 for 5.5 and $1650 for 6.5.  In the two weeks since, the market values have moved upwards as theorized.   5.5 currently is currently valued at $1,200 but should sell closer to $1,350. Likewise, 6.5 is valued at $1,750, but should be closer to $1,975.  Both have room to grow.

Comparing FF #48 to ASM #129, it’s interesting to note that the valuation at the lower range of FF #48 does not behave the same as ASM #129. It is possible that not only is 2.5 of ASM #129 is undervalued, but even the surrounding grades of 1.8- 3.5 are undervalued. Another possible explanation is that people are simply more willing to pay for FF #48 to just own it, even at a lower grade. Supporting this is the drastic difference in overall availability of the two book, which as it currently stands, there are twice as many registered ASM #129 as there are FF #48.

 

THE BOTTOM LINE

The concept of value investing seems to exist in theory for comic books; at least in the context of an inefficiency in fair market value vs. grade. Rather than guessing at which comic books will shoot up in value next, there is potentially books with grades that are presently undervalued. For Amazing Spider-Man #129 it is in CGC graded 5.5 and for Fantastic Four #48 it is for the grade 5.5 and 6.5.

The idea of value investing for comic books is still premature, but could prove to be a lucrative strategy. To further test this concept it would be necessary to find specific example cases where a grade/fair market value inefficacy existed for a given time period that subsequently moved towards normalization.

If viable, identifying other grades/key comic books that are undervalued would offer a lower risk/higher reward scenario.

 

“Price is what you pay. Value is what you get.” – Warren Buffet