Our Chief Executive reports on the performance of the GB30 Rarities Index over the past year

Dear Reader,

The performance of the GB30 Rarities Index over the past year surprised even me...

The index increased by 38.6% (2007: 10%) amidst a global credit crunch and a backdrop of world economic gloom. There are no recession worries in the rare stamp market. No correlation with the worldwide economy.

The compound 10 year return of the index since inception in 1998 is 245.2%...

This equates to an average annual compound return of 13.2% over a ten year period.

Imagine putting your money in a bank and earning interest at that level! Imagine getting this sort of return from your pension fund...

To illustrate: let's assume you invested £10,000 in rare stamps from Great Britain at the age of 30. At retirement age of 65, you would expect to cash in an investment worth over £750,000.

This has always been the Stanley Gibbons dilemma. The company would be far more valuable if we didn't sell rare stamps but simply bought them and held them in our vaults for years.

Unfortunately, we are stamp traders - more the broker than investment company. We get a commission for doing all the hard work and you get all the profit.

That's one of the classic rules of capitalism. We are the wealth "generators" and our clients are the wealth "accumulators".

For example, in 2004, we sold a SG132 £1 brown-lilac, one of five known examples, for £65,000. Three years later, it's now worth £125,000. That's a 92% return to our client in three years!

Why is the index up by so much?

You may remember a high profile auction which took place in June last year. You might even remember our newsletter following that auction...

It's worth reading again - follow the link below:

http://old.stanleygibbons.com/investments/include/show-newsletter.asp?strDate=13062007

The auction of the GB collection belonging to the legendary investor, Bill Gross achieved some new prices last year. This set a benchmark which other auction houses have since followed...

Collectors have willingly paid these new prices.

If you didn't take our advice back in June last year, not to worry. We still believe the bull market in rare stamps from Great Britain has a long way to run.

We see no reason for it to ever stop running. Rare stamp prices have been relentlessly going up for the past 50 years.

More and more investors are finally waking up...

The voice of the bear is loud in the stock market. The bricks and mortar are falling down around your ears. Our investment products offer an escape route.

Let's look at the numbers

Every single stamp in the index increased in value this year. The worst performer still went up by 8.6%. The best performer increased by 93.5%!

So what was the stamp you wish you owned?

The SG135 1878 10s. greenish grey (Plate 1) - white paper increased from £62,000 to £120,000. It just goes to show that, apart from the stable returns we promise, exceptional returns are achievable.

The chart below shows the performance of the GB30 Rarities index compared to other popular investment classes over the 10 year period from 1 May 1998 to 30 April 2008:

Rare stamps from Great Britain are the clear winner!

But more importantly, the diversification benefits are now in a period of "proof in the pudding". Whilst the credit crunch and sentiment shift is destroying the investment value of property, rare stamps have continued on their passion fuelled growth curve.

Over the past 10 years, the stock market has delivered total compound capital growth of only 1.3%. Obviously, dividends paid by FTSE 100 companies would improve this performance but it would still be worse than simply leaving your money in a savings account.

I look forward to the next few years where the rare stamp market will prove its worth and I am confident that more savvy investors will wake up to the benefits of "real" diversification.

The total value of the components of the GB30 Rarities index is now £1.5 million compared to only £0.4 million in 1998. Most of these stamps are difficult for us to buy...

Collectors are willing to pay a premium to last catalogue published prices when such items come up at auction. We find our self priced out of the room. This is because our catalogue prices follow the market - they do not set the market price (a popular misconception).

Condition is even more important when considering the quoted catalogue values of stamps at this level. I therefore urge against any investor attempting to "beat the market" by going it alone.

Dealing in rare stamps remains a specialised skill. Stanley Gibbons has built up a knowledge base over 152 years trading which ensures we can give the best advice to investors.

The Alternative Index

I read a comment recently in an article written by a disgruntled Independent Financial Adviser (who is also a passionate stamp collector). It was suggested that the GB30 Rarities Index might be a convenient index employed with the benefit of hindsight.

There is an obvious flaw in this argument. How could we develop an index which reports future price movements, in hindsight?

But, let's assume the point intended was that Stanley Gibbons could have just selected the best stamps or even have manipulated the prices of these stamps in our catalogue.

Well one thing you could do is compare independent auction realisations for items in the GB30 Rarities index...

You will see that our prices are in line with actual auction realisations.

Last week, I decided to put this person's argument to the test...

I created an alternative index, comprising another 30 stamps and compared the prices in 1998 to today...

The selection criterion was every 10th SG number. Naturally, due to the random nature of the selection, some stamps included are not rare or considered of investment merit. The results were no surprise to me - take a look:

 

SG No	Description	Condition	1998	2008	Increase	Increase%
1	1840 1d. intense black	Unused	£3,500	£15,000	£11,500	329%
10	1841 1d. deep red-brown	Unused	£160	£800	£640	400%
20	1854 2d. pale blue (plate 4)	Unused	£1,600	£4,000	£2,400	150%
30	1855 1d. brick-red (Die II)	Unused	£225	£275	£50	22%
40	1857 1d. rose-red	Unused	£28	£45	£17	61%
51*	1870 1 1/2d. Rose-red	Unused	£200	£400	£200	100%
60	1854 6d. purple	Unused	£3,000	£10,000	£7,000	233%
70	1856 6d. pale lilac	Unused	£550	£1,100	£550	100%
80	1862 4d. pale red	Unused	£575	£1,500	£925	161%
90	1862 1s. Green (Plate No. 1 Plate 2)	Unused	£850	£2,200	£1,350	159%
101*	1865 1s. green (Plate 4)	Unused	£775	£2,000	£1,225	158%
110	1867 9d. Straw (plate No. 4)	Unused	£700	£2,000	£1,300	186%
120	1867 2s. pale blue	Unused	£1,700	£3,500	£1,800	106%
130	1882 5s. rose (Plate 4)	Unused	£6,000	£28,000	£22,000	367%
140	1875 2 1/2d.rosy mauve	Unused	£8,000	£18,000	£10,000	125%
150	1875 1s. green	Unused	£325	£500	£175	54%
160	1880 4d. grey-brown	Unused	£225	£350	£125	56%
170	1880 1d. lilac	Unused	£90	£200	£110	122%
180	1883 5s. rose	Unused	£475	£950	£475	100%
190	1884 2 1/2d. lilac	Unused	£60	£75	£15	25%
200	1887 2d. grey-green & carmine	Unused	£25	£40	£15	60%
210	1890 10d. dull purple and carmine (shades)	Unused	£45	£70	£25	56%
220	1902 1d. brt scarlet	Unused	£1.25	£2.75	£1.50	120%
230	1902 2 1/2d. ultramarine	Unused	£12	£32	£20	167%
240	1909 4d. pale-orange	Unused	£18	£45	£27	150%
250	1902 9d. dull purple and ultramarine	Unused	£100	£195	£95	95%
260	1902 2s.6d. lilac	Unused	£240	£500	£260	108%
270	1911 1/2d. pale bluish green	Unused	£50	£75	£25	50%
280	1911 1d. rose-red	Unused	£35	£65	£30	86%
290	1911 2d. dp dull green and red	Unused	£25	£55	£30	120%
			£29,589	£91,975	£62,386	211%
	Average annual compound increase	12.0%

Average annual compound increase 12.0%

 

* Note SG50 and SG100 do not exist. The nearest number used in their place.

The alternative index provided similar results to the GB30 Rarities index even though some of the stamps included lack investment merit.

If you don't believe me, why not...

DYOR (Do Your Own Research)

The 2008 edition of our Great Britain Concise catalogue was recently released at a retail price of only £24.95. This year's edition includes, free of charge, a new full-colour re-print of "Great Britain Numbers Issued, 1840-1910" last published by Stanley Gibbons in 1990 and long out of print.

The numbers issued booklet is a useful companion to the investor in stamps providing information on "total supply" (ie. the number of stamps printed for each issue).

If that was not enough...

We still have some copies left over of the 2006 edition of Great Britain Concise. To let you do your own research on how prices have moved over the past two years, I would be happy to give a copy of this FREE when you buy a copy of this year's edition.

If you would like to take me up on this offer, please contact our Investment Director, Adrian Roose today on:

+44 (0) 1481 708 277
email investment@stanleygibbons.co.uk
TOLL FREE from the USA 1 866 644 6146

Sincerely,

Mike Hall
Chief Executive
The Stanley Gibbons Group

P.S. Our guaranteed minimum investment return offerings are fast approaching their subscription limits. Please ask Adrian Roose for more details to ensure you get in before we close subscriptions to new entrants.

Background on GB30 Rarities Stamp Price Index

The GB 30 Index lists Great Britain rarities available on the open market, and gives an accurate picture of the market for scarce items. Stamps included in the Index represent examples of the type of classic material recommended by the Stanley Gibbons Investment Department to its clients. Such stamps are considered to be the most likely to show consistent returns over the medium to long term, as demand from collectors exceeds what, in many cases, is a very scarce supply.

The prices quoted are from Stanley Gibbons published catalogues which represent the estimated selling prices of Stanley Gibbons Limited at the time of publication. They are for examples in fine condition for the issue concerned. Superb examples are worth more; those of a lower quality considerably less.