by Max Hensley
Much of the fun of our hobby is in successfully buying things we want for our collection. Or sometimes not so successfully! Over the years I’ve accumulated some experiences about buying scripophily that I hope will help beginning collectors and perhaps be of value to advanced collectors too.
The focus here is on US and Canadian scripophily. Note that this is not about “where” to buy (for example, dealers, auctioneers, the internet, etc.), it is about how and what to buy.
“What” to buy is like picking a spouse. It’s a very personal matter, and one no one can make up your mind for you. If you are starting out with no preconceived notions about what you want to collect, here are some things to think about before plunging in.
NOTE: THESE ARE THE PERSONAL OPIONS OF THE AUTHOR AND DO NOT REPRESENT THOSE OF ANY OTHER PERSON OR ORGANIZATION, INCLUDING THE IBSS
Is the stock or bond “Live”? The first question you should ask is, “Is this certificate potentially ‘live’?” Some old certificates retain their security value. While a stock broker can price modern currently-trading companies or their close predecessors, determining residual value of older securities after mergers, redemptions and other complicated machinations is a job for specialists. Ironically many old “live” certificates in famous companies may have more value now as collectors’ items than if you redeem them at a broker – but selling them can be complicated due to securities regulations.
What about those revenue stamps? Stocks and particularly bonds from the 1860’s to the 1870’s may have imprinted Federal tax revenue stamps, and others through the beginning of the 19th century may have Federal and/or state adhesive revenue stamps. Valuing these is a specialist field beyond discussion here. Like autographs, they can add a lot of money to the value of an otherwise pedestrian piece. One Spanish- American war-period adhesive stamp boosted the price of an otherwise unremarkable stock in an eBay sale by $1,000. On the other hand, most 25 cent adhesive revenue stamps from the 1860’s don’t add any value. The take-home here is that prices can be driven largely by revenue imprints or stamps, not the underlying scripophily.
Autographs are extremely important. Is it signed by someone noteworthy? Next, look to the signatures (autographs). They can turn a junk certificate into a valuable piece. Check the officers and the shareholder. The shareholder name on the front is not an autograph – the name was filed in by a secretary. For shareholders, the autograph will be found on the back when the shareholder endorsed the stock for sale. Famous people often used agents or secretaries to endorse on the back – so it might be the “name”, but it might not be the autograph! Some valuable autographs have been found on transfer slips found stapled to old stocks (mostly these get thrown away, a big mistake). Bonds may have celebrity autographs as officers or, rarely, other functions like guarantors. “Facsimile” or preprinted signatures present on modern certificates are worth far less than autographs.
You won’t come across valuable autographs very often. The dealers who broke up archives of important companies like the Northern Pacific Railroad already culled through the material looking for these. And yes, many signatures are unclear. This is a specialized field beyond the scope of this discussion, but be aware of it.
Prices, generally. Setting aside live stocks, autographs and revenues, what else should I keep in mind when buying? Some limited guides list auction or “opinion” prices (see below), but pricing is a multi-faceted black art and, as they say, “past performance is no guarantee of future returns”. Scripophily prices, like all others, are a function of demand, which in turn is a function of rarity and many other factors. Let’s look at rarity first.
How is rarity important? In stamps, paper money or coins, a population of 10 in all grades is a great rarity and may be worth many thousands of dollars. But in scripophily, a population of 10 is just “so-so”. A pretty 19th century railroad stock with a census of 10 might be worth only $200 – and there’s a lot of price elasticity. If the population was reduced to five the price might be $350, and if increased to 50 the price would be $25 or less. On the other hand in more established collecting fields these curves are highly exponential – as rarity approaches one, the price approaches infinity. In today’s market, scripophily pricing is not like this at all.
Do some homework. You should try to get an independent feel for the rarity of a piece before you buy it – search eBay’s auction archive (they keep the last 3 months) to see if one (or more) has been offered before. Consult on-line dealer inventories like George LaBarre’s or Bob Kerstein’s (www.scripophily.com). Search auction house archives to see if it’s listed there. Even a straight Google search can reveal a lot. Go to shows like the National show in DC in January and see what dealers have. Check the Whaco database (now on-line at www.scripophilyusa.org.) Make use of on-line resources like www.coxrail.com for railroad stocks and bonds. If you don’t find the item in any of these resources, it may be rare.
Rarity is a moving target. Hoards do appear. Some fool paid $1592 for a North American Phonograph Co stock certificate (a popular Edison company with perhaps 8 known at the time) only to be told that the seller happened to find 8 more! You can try asking the seller if there are more available, but that hasn’t worked reliably.
Rarity among stock “families”. Stock families are variants of stock certificates. Typical variants are denominations (100 and < 100 shares) and classes (common and preferred). Generally, among stock denomination/classes the order of most to least rare is (1) odd lot preferred, (2) 100 share preferred, (3) odd lot common and (4) 100 share common.
Generally, issued cancelled certificates are more common than issued uncancelled or specimen certificates, and issued uncancelled certificates are more difficult than specimens. Realistically, there are more exceptions than rules among denominations/classes, but be aware that they are not all the same. Unissued or partly issued certificates generally should not be high on your list, despite these often being sold as “mint”. These are often widely available because they are found in the hundreds in unused stock books. However, there are plenty of exceptions. For example, an unissued uncancelled Virginia and Truckee Railway Co stock brought $686 on eBay.
Demand is the 800-pound gorilla of scripophily pricing. You can find hundreds of examples where rarity is constant but prices vary radically. This variation is the result of demand. Every piece of gravel in a parking lot is unique, but none of them are worth anything because no one cares. It’s the same in scripophily. A Michigan copper mining share might be known in 3 examples and bring $1,000. An otherwise unremarkable Arizona copper mining share with 3 known might bring $50. Why? Because there is a large (maybe 10 people with deep pockets) group of Michigan mining share collectors, but maybe only one or two interested in that Arizona mining share. Similarly, specimen bonds of early Texas rails used to bring over $1,000 each, but several active collectors dropped out and they now are worth half that at most. Certain Mexican and Chinese bonds brought 5-figure US prices during a speculative binge, now they are well under $100. Demand changes, and it is dependent upon a number of factors you should consider when formulating a price. You have to put yourself in the shoes of the market and avoid letting yourself create an anomalous demand of one.
Demand is dependent upon the subject matter and appearance of the certificate. Condition affects the appearance and can have a big effect on price, but scripophilists are not doctrinaire about this. Scripophily is forgiving of many things that would send US paper money collectors into apoplexy – corner tips, folds, toning, soiling, pinholes, stains, holes, etc. Bad stains will reduce price substantially but I’m not aware of anyone in this hobby who cares much about pinholes (usually staple holes where transfer documents were attached), two vertical folds (where stocks were folded for mailing), minor ink spots or limited crinkling, faint creases, little tear-outs at embossed seal lettering, or minor soiling. Fold splits or large margin tears are more of a problem, even if carefully repaired with conservators’ tape – these require a substantial discount, and should be inspected for carefully (hold the paper up to the light and look for denser areas). Brownish/yellowish toning (up to and including damp stain, a greying of the paper) should merit a substantial discount. Note that cancellations like pin-punching, punch outs at signatures, cancel stamps, etc. are not condition “problems”, they are simply a record of the processing of the security. Some collectors however prefer certificates without cancellations for aesthetic reasons.
Art Appreciation. All else being equal, artistically interesting securities are in more demand than “Plain Janes” with no vignette, excepting very early ones (prior to 1850) or those bearing a celebrity autograph like Thomas Edison or sports figures, etc. Some collectors prefer engraved certificates (bank note quality) or those more like folk art displaying charming lithographed vignettes of business activity or the antique product.
Is the company famous or notorious? Can the company or issuer be linked to a celebrity company? Predecessors of famous modern companies like IBM bring around $1,000 but a no-name defunct computer outfit may not sell on eBay for a dollar. Recent defunct famous companies like Enron, Trump Casinos, BreX, Lehman Brothers, etc. bring prices on the scripophily market that are often higher than their market prices when they were alive. An otherwise unremarkable specimen stock of Lehman Brothers that used to hang in Richard Fuld’s office sold for five figures in Germany.
Collecting fields are not all equal. Demand also varies with the collecting field you choose. There are hundreds of ways to collect, but the most popular are generally the most expensive. In approximate order of popularity on a worldwide basis, with most popular listed first at this writing in 2019, are – US government treasury bonds, zoos, railroads, sugar, guano (yes, no kidding), Confederate bonds, mining (especially Michigan and western territorial, and more recently Alaska), automobiles, banks, medical, insurance, industrial, land and development companies, utilities, and finally state and local governments. Demand shifts around with no notice and without explanation. Demand for certain geographic fields, e.g., “all Ohio securities”, changes frequently as collectors enter the market or exit, but Texas and western states have generally performed better than the rest. Expect to pay comparably more for popular locations.
Should you avoid issued cancelled stocks? Be careful about buying issued cancelled securities. Like unissued stocks, these can be quite common – they often were found in large numbers in corporate archives. There may be autographs of value, but if your research shows a lot of them on eBay, for example, shop around for value. In my personal collecting I’ve found maybe 1 out of 100 classes of issued cancelled stocks are rare. The rest are common.
Do European tax stamps tell you anything? Securities in US companies bearing embossed European tax stamps generally are common as these floatations often were quite large and investors there seemed to never throw anything away. I can’t think of a single stock bearing one of these stamps that is rare.
What about specimens and proofs? Proofs are one-off test printings without serial numbers on “India paper” that are provided to customers by printers for approval. Specimens are models of the certificates or bonds as printed (on rag paper) and are usually stamped “specimen” with 0’s for serial numbers. Paper money proofs and specimens bring very large sums, but not yet in scripophily. Instead, demand is greatest for them when there is no issued or unissued counterpart available, i.e., if you don’t buy the specimen or proof you won’t be able to buy anything. So, for example, a specimen of a commonly available issued cancelled stock will bring about as much as the issued stock, even though it is much rarer (as few as two printed). These tend to be favorites of collectors valuing the artistic qualities of scripophily because they are pristine with no defacing stamps or hole punches. Other scripophilists disdain them as having no character.
What about varieties? Mature collecting categories like coins and stamps appeal to “cherry pickers” who know obscure but rare varieties, such as in US bust half dollars. It’s not like that yet in scripophily. There isn’t much demand yet (and thus not much of a price premium) for varieties like capitalization variants, changes in registrar or transfer agent, or different officer’s signatures (absent autograph value). Some of these are quite rare, or even unique, but prices don’t reflect this because demand for them has not developed yet.
Be flexible. Investment returns will be better if you do not let your chosen topical field box you in. For example, you might decide to collect Montana mining. You’ll soon see the North Butte Mining Co stock. You can buy this for your field, but don’t pay much and forget price appreciation since around 750,000 of them were found in a Montana warehouse. Rigorous adherence to a narrow field will force you to buy things with no appreciation potential or that may be overpriced.
Study your sellers. Learn about the pricing habits of your sellers (including on eBay). Some prefer to price high and wait a long time for someone to really want the piece (and with near-zero interest cost of carrying inventory, why not?) Others just want to move the inventory quickly. And some dealers may shift back and forth. Do your homework and you will soon tell who is high and who is not.
Can I just skip all this work and buy a price book? Generally, the sad answer is “no”. One of the charms of scripophily is that we don’t have anything like the US coin collectors’ “Red Book”, a guidebook to US coin prices which has been updated annually since 1947. The up-side is that every one of your purchases can be a “cherry pick” if you take the effort to be informed. There are some databases you can use. One of the best is Coxrail for North American railroads and coal companies, Whaco is useful for general coverage of US material, and the special order books of auction records from Kurle also can be helpful – see elsewhere on this site for further information on these. The problem is that they are often out-of-date (Whaco stopped in 2007) or incomplete to varying degrees. Scripophily will become far more successful when meticulously maintained public databases are available, but for now the collector is pretty much on his own.
My brother says I must get into Chinese Petchili Province bonds since they are going up fast. Speculations. The hobby has frequent bouts of “irrational exuberance” for particular stocks or bonds with a redemption story, i.e., they are promoted as “live” items that are going to pay off. This started in the early 1980s with long-defunct US railroad gold bonds that someone decided were going to be redeemed in gold, with compounded interest. The proposition was ludicrous on its face, but who can argue with a thundering herd of irrationality? This speculation collapsed, but has been followed at regular intervals with similar “tulip mania” for certain Chinese and Russian bonds, Napoleonic bonds, and Mexican bonds and bank stocks. eBay seems to be the current host for a lot of these things, but even reputable dealers won’t refuse to sell at what the market is paying. Buyer beware! If it’s an issued uncancelled bond and the price seems out of line for scripophily, be advised that it is likely to be a sad experience unless you can sell faster than the market ultimately falls.
How can I buy so I know I will make money? Good luck with that. I know a devoted specialist collector who is now disposing of his collection. He bought during a period when several very deep-pocketed persons were bidding for similar material. One of them set up his museum and is not buying any more. So demand has mostly collapsed and my collector friend is getting perhaps ¼ of what he paid. The obvious lesson is change fields when things get hot where you started out. Still, this collector views his losses as no different than money spent golfing or on vacation, which leaves only memories when things are over. The pleasure was in the process. In scripophily you enjoy the thrill of the chase, but you also get the satisfaction of learning about the history of the pieces you collect. Don’t buy scripophily with the idea of making big money. It’s a ticket to education and, just maybe, if you are informed and careful enough you could profit from the enterprise.