Determining Undervalued Coins

There has been some discussion about coins as investments lately, and everyone has their opinion about whether coins make good investments (typical opinion is that they do not make good investments). But, lets assume that you were going to purchase a coin or coins purely as investments, what would you buy? I'm not asking because I'm interested in actually pursuing the endeavor, it just seems like an interesting mental exercise and opportunity to learn about opinions on the matter.

The strategic way of going about it would be to determine which coins are undervalued in the current market. We all know that what ultimately determines a particular coin's value is supply and demand. Supply can typically be considered fixed with older coins, therefore, fluctuations in coin prices will be due primarily to changes in demand. I haven't been involved with coin collecting long enough to have a feel for market shifts based on collectability of particular series. Are there attributes of certain series that make them more or less collectable than others? Do you foresee the demand for certain series or coins increasing in future?

I have been kicking around ideas about methods for determining which coins are undervalued. There are many factors to consider: Popularity of series, Age, Mintage, Portion that have survived, Number of high grade examples, etc, etc. Unfortunately, I do not have access to the TPG population reports, which would probably contain the most important information. Therefore, I am left with a mintages, price guide values, and a limited general knowledge for making my determinations. I figured that a simple place to start would be to compare coin values to mintages. Mint state values get a little crazy, so I used the AU50 prices listed in the grey sheet. I also just considered the general issue variety and ignored errors and less common varieties. Here's a plot of price verses mintage for 1800's half cents and large cents:

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Based purely on mintage, the portions of the lines that trend toward the lower-left are undervalued and toward the upper-right are overvalued. According to this data, Braided Hair half cents are the best buy while Classic Head and Draped Bust large cents are the worst. Of course, this representation ignores a lot of important factors. For instance, large cents are more popular with collectors than half cents. And, maybe a buttload of Braided Hair half cents survived in high grade whereas others did not (Is this the case?). Prices in general seem to nosedive around the 18-teens and 20's. Does this correlate to a period when people started considering coins as collectables? I suppose that this would increase the number of high grade examples that survived.

So how would you guys go about making your determinations? What kind of quantifiable data could be obtained for making a calculated ranking? And/or what is your gut feel for undervalued coins based on personal experience?

 

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Though i really like the large cents, I don't know enough about the series to comment on price/mintage.

I really like the way you graphed the series and analyzed the data. Keep digging and let us know what you find.

 

I guess the point of showing the plot, while it certainly is interesting, was to make the point that mintage alone paints a very incomplete picture. The values are based on other factors that are not accounted for using this method. Ultimately, I wanted to get educated opinions on which coins or coin series were currently under valued. With that in mind, I was going to see if I could develop an analysis method that would give those results. I guess it would be like reverse engineering a quantitative method that summarizes the factors leading to "gut feelings" of those that may have an accurate sense of this type of thing.

 

Not that I know much about coins but based on a coin article someone posted recently, if you want to buy a coin as an investment, you need to think and act like a collector and buy a coin because you like it, not because it would make a good investment. I know on CNBC they talk about coins as an alternative investment along with stamps and books here: http://www.cnbc.com/id/39580354/. If I wanted to buy coins as an investment I would buy junk silver. The term "junk" does not apply to many of the coins in junk. Some have just not matured yet as a collector's item like silver Roosevelt's or some just wound up there during spiked silver prices. A collector is more likely to do their homework when it comes to particular coins and know its worth and make a more wise purchase although they can and do make mistakes sometimes.

 

Personally, I would buy as many one oz Canadian Silver Wildlife Series coins as possible. Some of them have insanely low mintages and they are sold from Provident for spot, other than the ones that have already matured in value. Also, who doesn't want some coins with Moose and Cougars?

 

provident bank??? all banks or just by you??

 

Provident Metals. They have the ad that sometimes shows up in the upper right hand corner of the page. It's either their ad or LostDutchman's ad.

 

I guess I should have specified. I'm particularly interested in opinions on non-modern, non-bullion, business strike coinage. The value of bullion coinage is heavily dictated by PM spot prices, so the "undervalued" property with respect to collectability would be difficult to quantify.

 

If your looking for non bullion, I would probably say more modern silver coinage. Not really modern actually, but silver coinage after the Barber series. Mercs can be had in relatively good shape for less than melt. The same with SLQ and Walkers.

 

Yes, those modern coins like silver Roosevelts, Washingtons, and JFK/Franklin halves just haven't matured as collectors items yet. Mercury dimes can be had for melt, I just bought 5 for $10.50 at a PM shop.

 

That is an interesting way to look at them but there are lots of variables that also play into the prices that cannot be put on a x,y graph.

 

Two things

First, mintage numbers are a dubius means of knowing the current availability of coins, for a whole bunch of reasons.

Secondly, demand, I believe, is a bigger factor to pricing than supply.

 

Completely agree. Supply is completely secondary to demand. A 1909sVDB is a common coin really, it is only throngs of collectors who get started on "cheap" lincoln cent collections that create demand for this coin. If not for this excessive demand, a 09sVDB would be a $75 coin. I have tons and tons of 19th century US coins with far lower survival rates that are worth much less, simply because very few collect the series by date and mintmark.

Any generic advice regarding this topic I would have would be this: Buy what most dealer do not have. Rare, high grade, pretty coins for the grade, collectible coins are always in demand and dealers have a hard time keeping them in stock. Those coins, absent any other unknown factors, are the ones that historically have held their value/gone up the most. Cleaned, damaged, unattractive specimens that fill many dealers offering do not.

 

Any coin from the early 1900s is usually quite cheap(other than key dates), and there aren't really any that have an extremely high mintage. Hold on to them and they're almost sure to increase in value. IMO

 

i think you just described ancients and medieval coinage. made of silver even. thankfully, other american collectors avoid them! keep your (not you medora) overpriced copper coins (cents). i'll buy my really old silver for less.

 

I agree with you there. I have decent VG Barbers I paid $5-$6 for, a couple of standing quarters that were $6.50-$7, and Mercury dimes and a Walker I paid close to melt. These I believe could go for more later or even now from what I seen on Ebay. To, me that is a good investment if I would be willing to sell them. I am quicker to sell other silver coinage if I already have the date.

 

Mintage was important on the 2011 Army half because the low mintage landed it the designation of key to the series. That gave the astute buyer about a week to pick them up for $20 before everyone else noticed (they subsequently tripled in value). the 2006 W eagle was a similar score- I picked those up cheap before it was widely noticed that it was special. Your best bet is to keep your eyes open and act VERY quickly when a new product from the mint is in some way special yet goes unnoticed.

 

Careful on that- it is a bit of a mine field. Most of us have bought a "lightly cleaned" coin at some point. That "lightly cleaned with natural toning covering it" thing is a tough one. Some here say that many older slabbed coins have a light cleaning.

 

Cherd: You are asking some interesting questions. IMO, demand is key. Supply is relatively fixed for the classic series you are tracking. Coins are basically worth what someone is willing to pay and so many variables go into this aspect. The economy is likely having an impact on what people are willing to pay for example. In many cases, these coins do not change hands very often. Personally, I do not see demand increasing significantly for any of these. Doug has shown graphs showing that the market for collector coins is way down. Will it come back...maybe. However, I do not see a wave of new collectors coming on board and increasing demand for the classics If anything, new collectors tend to gravitate toward moderns. TC

 

Oh I am with you there. I just bought a gorgeous toned Sassanian large silver coin for $40. I leave the 1916d dimes, 09sVDB's, and 1916 SL quarters to others.