Tuesday, March 20, 2012

Analysis of a Losing Investment -- Strasburg


Analysis of a Losing Investment -- Strasburg

A few posts ago, I proposed a risky short-term investment in Strasburg.  I hypothesized (upon seeing prices of completed ebay listings) that Strasburg autos tended to sell much cheaper in auctions than Buy It Nows.  One of a few reasons for this is that there weren’t too many competing bidders in high end auctions, whereas an avid Strasburg fan tended to spend the extra dollar on a more expensive Buy it Now.  It was also intriguing that Buy It Nows were so overpriced that it may have made cheaper Buy It Nows much more attractive, even if they were more expensive than auction sales.

So, I spent $700 on 4 Strasburg autos (2010 BC Ref Auto, Sterling Ref Auto BGS 9.5/10, and 2 Sterling base autos).  Not only would I implement my strategy, I happened to snag these autos at prices below average ebay sales.  I thought this might mean that even if my strategy didn’t work, at least I could break even.

Shortly thereafter, Strasburg hit a few rough starts in Spring Training and his prices fell dramatically.  I tried to recoup my investment, but failed.  As of right now, all of these autos are up on ebay via an auction with a starting price of $600 for the entire lot.

Unless bidders go nuts and pay top dollar, I expect to lose money.  Also, I lost out on other possible investments I could’ve used the $700 for…double whammy.

There are a few things I took away from this.  Most importantly, when it comes to high end players like Strasburg and Harper (a similar thing happened to Harper once he was demoted this Spring.  Sellers are flooding the market with Harper autos), the market is very susceptible to everything.  It’s irrational, but it’s reality.

Here’s how I see it:  the market saw a “struggling” Strasburg, trying to hit his spots, and not mastering the control that made him a stud pitcher in the past.  Yet, the reality is this is exactly the correct way to go about Spring Training.  With each start, Strasburg has been fine tuning his command.  And since he is relying on fastballs, it’s obvious MLB hitters have a chance.  So, instead of seeing a craftsman focusing on perfecting his game, collectors see an ERA of 4.00.  It’s a silly knee-jerk reaction, but it resulted in dumping Strasburg autos at lower prices.

Strasburg is fine.  He was fine at the end of last year when he returned early from Tommy John surgery.  He’ll be a top-5 pitcher for the next decade.  But, when all is said and done, my investment was a losing one.

Lessons:
  1. Never underestimate how fickle the market can be, especially with hyped players.
  2. High-end players are riskier as each percentage move involves more money
  3. Never try new strategies on higher priced cards


2 comments:

  1. There are 2 points I'd make on this:

    1. High Buy-In price: I think the strategy was a good one, but you could have obtained the above four cards at a cheaper price point than 700 if you bid on the right Ebay auctions.

    2. Too early to sell: With the season just starting and Strasburg starting Opening Day for the Nationals, I certainly don't think this is the optimal time to be selling them. There certainly will be spikes in the near future.

    I invested about in $800 in Strasburg as well (2 Sterling 9.5's, Chrome 9.5, TC Blue RC Ref Auto, TC Ref RC Auto) and certainly don't expect to lose on this one. I think Strasburg will turn out to be a pretty good investment actually.

    ReplyDelete
    Replies
    1. Valid points, but I probably didn't outline my strategy clearly.
      1. At the time, $700 was a bargain. They dropped sharply soon after I made my purchases.
      2. My strategy simply involved ebay trends. It was meant to be a quick flip and was not a speculative purchase. Sure, everyone (including me) agrees Strasburg is a stud. Whether his cards will increase in value in the long-term is anyone's guess. I truly believe you can flip a coin on that one.
      In the end, my observations were incorrect over whether I can immediately sell them for a profit via an ebay Buy It Now. I sold them for $650 pretty quickly on the forum, losing a little over $50 (because of paypal and shipping fees).

      I wish you luck with your Strasburgs. Thanks for the comment!

      Delete