Bull Case Bear Case: The Week of January 31st (Pro Edition)
February 1, 2022
Dylan Dittrich, Bradley Calleja
Welcome to the latest edition of Bull Case Bear Case, with a full slate of offering analysis for our Pro subscribers. As always, the goal is to give investors a clear, balanced view of both sides of the coin. Prepare to tackle the week with confidence!
2019 Luka Doncic Game Worn & Signed Sneakers
2/1 @ 2:30PM ET
Rookie sneaker of rising star. It’s easy to forget that Luka Doncic is still just 22 years old and in only his fourth season in the league. Because of his immediate success and acclaim upon entering the league, it feels like he’s been around longer. Just three and a half seasons in, his resume is already impressive: Rookie of the Year, two All Star Game appearances (with a third likely on the way), First Team All NBA twice, and already 11th in all time triple doubles. Should he continue on this trajectory, winning MVP awards and titles in the future, he has the potential to enter the pantheon of greats. That of course would make a key piece of signed, game-worn, and photomatched memorabilia from his rookie season a valuable commodity.
Growing sneaker profile. Interestingly, Luka does not yet have a signature sneaker. He currently wears a Player Edition of the Air Jordan 36, featuring his new logo, and the expectation is that a signature sneaker is on the way. Should that be a success, it may be the start of a strong sneaker legacy for the player, which would liken rookie game-worns to Jordan’s Air Ship or Kobe Bryant’s EQT Top Ten 2010 (pre-signature sneakers). Luka is also notable in sneaker circles for swapping out sneakers relentlessly. Twitter account @lukadonkicks, which tracks the player’s sneaker models of choice and performance in them, has noted that he swapped sneakers at halftime 21 times during his rookie season. So, that these were photomatched to five games makes them a relative rarity in their consistency of use. While Luka’s individual sneaker profile may stand to grow, there has been growing demand for game-worn sneakers in recent months. While the $1.472mm sale of Michael Jordan’s Air Ships at Sotheby’s in late 2021 was a catalyst, two six figure sales of rookie-worn, non photo-matched Kobe Bryant sneakers at Heritage in December (for $192k and $156k respectively) provided evidence of broader category strength, destroying previous sales marks for similar pairs. Two sneaker buyouts - $203k for LeBron’s High School worn Kobe’s and $110k for Stephen Curry’s Photo-matched Nikes, provided further evidence of concrete and growing interest in the category, though it bears noting that these both came from the same buyer. Still, the non Jordan six figure interest provides momentum to the category entering 2022.
Collectible appeal of the player, domestically and abroad. Luka has quickly risen to become one of the most collectible players in basketball. The $4.6 million sale of his 1 of 1 Logoman card is the second most expensive basketball card ever sold, putting him in esteemed air at a young age. For the most recent quarter, his jersey was the sixth highest selling in the NBA. Population reports for his base (18k PSA 10s) and silver Prizm cards indicate how widely he’s been collected over the past few years, and though those values have faltered, his high-end cards continue to appreciate. His National Treasures Rookie Patch Autograph cards, numbered to 99, consistently garner sales in the low-to-mid six figures. That being the case, those bullish on the opportunity for key game worn memorabilia, significantly more rare in quantity, to close the gap to card values would see opportunity for that thesis to play out here. It’s additionally worth noting that with the Slovenian player beginning his career playing professionally at Real Madrid in Spain, he commands adoration of an international fanbase (particularly in Europe) that may not be as strong for other players. This incrementally strengthens the potential breadth of long term demand relative to the already growing international NBA audience.
Track record of game-worn sneaker strength is short. Prior to the momentum seen at the end of 2021, the track record of game worn sneaker strength outside of Michael Jordan was fairly limited. Rookie sneakers of Kobe Bryant - extremely similar to the pairs that garnered six figures at Heritage - had sales of $24,000 and $26,400 at Goldin in May 2021 and December 2020 respectively, not to mention $10,367 at Grey Flannel in June. Really, it’s in that low-to-mid ten thousands range that game worn sales have typically clustered in recent years. Between Goldin, Heritage, SCP, and Grey Flannel, only approximately 20 sneakers have ever sold above the valuation here, and the only ones that have were Jordan game-worns, Kobe game-worns, and LeBron game-worns. In fact, just three have been non-Jordan sneakers. In terms of Luka, the most relevant public sale was for a pair of rookie sneakers (Hyperdunks) photo-matched to three games, dating later than the pair here (March vs. January). They sold at Goldin for $28,800 in May. That was up just slightly from the sale of the same pair at SCP Auctions in August of 2020 for $26,896. Again, the end of 2021 sales may have reset the market significantly higher relative to May, but a bearish or even cautious investor may prefer to see further evidence of that momentum sustained into 2022 to ensure that activity was not an outlier or blip. The game-worn sneaker category has also been tremendously challenged to date in fractional. As of 1/27, the average ROI of game-worn sneakers on Collectable is -22.32%, with four of seven offerings down more than 30%. It may then suit even a lukewarm-to-bullish investor to await secondary market activity before initiating a position.
Not a particularly notable sneaker model. The sneaker model here is the Nike PG 2.5. PG stands for Paul George - it's the signature sneaker of a player whose popularity and relevance has somewhat waned in recent years. The model is perhaps most notable for being the sneaker destroyed by Zion Williamson’s superhuman foot at Duke. Luka was a hotly-pursued sneaker free agent during his rookie year before ultimately choosing Jordan Brand, and he wore a number of different models from different brands throughout the season. While the rookie-worn status will remain additive to value, it’s possible that other, more notable sneakers will push PG 2.5s in an unspectacular colorway further down the stack in terms of desirability. Possibilities may include the debut of his signature sneaker, key Finals-worn sneakers, and Kobe silhouettes worn during his rookie season, among others.
Significant time horizon risk. As mentioned above, Luka has already become highly collectible, and that demand is reflected in the values for his assets. His age serves as both a source of upside…and also a tremendous risk. With his high-end cards valued the way they are, and with these sneakers valued at $82,000, the expectation is that he will be a player that wins multiple MVP awards and contends for NBA Championships with regularity. Should he approach those heights, there’s upside for his assets through growth alongside and potentially above the market, but at these levels, many unaccomplished achievements have been pulled forward into his valuations. Injury risk and organizational risk (can the Mavs shape a team around Luka to contend) are significant factors that may constrain or even destroy value in the years ahead. Promising though Luka may be, such is the case with any young star with high expectations. Patrick Mahomes may be an interesting cross-sport parallel, though his accomplishments are already more significant.
1969 Oakland A’s Reggie Jackson Photomatched Jersey
2/2 @ 2:30PM ET
Mr. October: serial winner with impact beyond the stat line. To many, Reggie Jackson is known as the most clutch player in MLB postseason history, or in fewer words, he’s Mr. October. In 27 World Series Games, Jackson had 35 hits, 10 home runs, 27 RBIs, and hit .357. He played a major role on five World Series winners, twice garnering World Series MVP honors. In game 6 of the 1977 World Series, he hit three home runs off of three different pitchers on three straight pitches - an absurd achievement and one of the very most memorable moments in the game’s history. In Oakland, he won five straight AL West titles, three straight AL pennants, and three straight World Series Championships. In New York, he won four AL East titles, three AL pennants, and two World Series Championships. He was a 14 time All Star, and currently sits 14th all time in home runs. At the peak of his powers, Jackson was a larger than life star in every sense of the word - the type that has become less familiar in today’s game.
Blue-chip memorabilia from memorable season. While the 1969 season was not Jackson’s rookie year, it did serve as his breakout moment in the majors. His full rookie campaign was not a failure - he hit .250 with 26 home runs - but his sophomore effort introduced a star to baseball that would be around for two decades to come. Jackson hit .275 with 47 home runs and 118 RBIs, making his first All Star Game in the process. Not only that, but his first half of the season was blistering, as he briefly posed a threat to the home run record paces of Maris and Ruth. Before the All Star break, he hit 39 home runs, batting .287, before fizzling in the late stages of the season (which would be a warning of struggles to come the next year). A different, signed jersey from that season has a strong track record of appreciation, selling first at Mile High for $14k in October of 2018, then getting photo-matched to his 1970 Topps card photo before selling at Goldin for $39,600 in August of 2019, and ultimately selling most recently for $145,200 in May after additional confirmation from Resolution Photomatching. A PSA 9 1969 Topps card sold for $93k in December, up from $54,000 in April (at the same auction as the jersey), though this was a considerable uptick over the last late August sale of $51,660 as well.
Jackson distinctly collectible. The list of players that have had a card sell for more than $1 million is actually not particularly long, even after the market’s roaring performance in 2020 and 2021. In fact, there are just 15 players known to have had a card exceed that level….and Reggie Jackson is one of them. Back in February of 2021, his 1969 Topps rookie, graded PSA 10 (pop 1), sold for $1,005,600 at Heritage Auctions. While the card’s status as the only one out of over 8,000 graded to attain a PSA 10 certainly helped, nine figures don’t get shelled out for just anybody. Jackson’s on field accomplishments contribute to his collectibility, but just as important was his off-field charisma. His reputation for unmatched confidence and an existence consistently at the center of attention made him somewhat of a cultural icon, and it was that charisma that landed him various opportunities in tv and film during the 1980s. Not only that, but Jackson was a major spokesperson for Upper Deck in the 1990s, and the inclusion of 2,500 autographed Jackson cards in the 1990 set was a first true foray into serial numbering and autos as chase cards.
Waning relevance given resume. While Jackson was incredibly relevant and iconic throughout the 70s and 80s, the potency of Mr. October’s clutch reputation may be waning as a new collecting generation comes into focus. A bull case relies on the persistence of that reputation, as his statistical profile alone is unlikely to do the heavy lifting. The only category that Jackson tops is career strikeouts. Now, that’s a reflection of his longevity, sure, but it’s perhaps not commensurately balanced out by his standing in home runs (14th), RBIs (27th), or even walks (31st). Jim Thome, for example, is second all time in strikeouts, but ranks 128 spots ahead of Jackson in slugging percentage, and boasts superior ranks in both home runs (8th) and walks (7th) - in fact, the two share incredibly similar statistical profiles. There are very few eye-popping accomplishments on Jackson’s stat sheet - particularly relative to those that command similar values. Will his notoriety be lost to history over time?
Most notable comp raises more questions than it answers. As mentioned above, a signed and photo-matched jersey from 1969-70 sold at Goldin in May for $145,200. Note that this was after the $1mm Jackson card sale. The May price was a significant step up from the sale for $15,006 at Heritage in December 2020, and is also a better example due to the signed/inscribed qualities. It seems it was likely used as a benchmark for this asset, as Collectable paid $145,000 for the jersey offered here. The jersey sold in May was photo-matched to Jackson’s 1970 Topps card photo, making it an incrementally intriguing proposition for collectors; it’s additionally matched to a specific game in which Jackson hit a home run. The photo-match here is to a relatively unknown photo at RFK Stadium. Still, the valuation prices this jersey above that May sale, despite a less compelling photo-match in addition to the absence of a signature; it also bears noting that a patch, which did not appear in December 2020 Heritage sale, has re-appeared on the asset here, raising questions around restoration choices and originality. In the same May auction, a 1967 jersey in which Jackson is believed to have hit his first home run sold for $98,400. The distinction is a bit more dubious there (no photo-match, mostly based on anecdotal evidence, Jackson refers to it as his “first shirt worn in the big leagues” - not accurate), but nonetheless, provides another data point for consideration. While Jackson’s PSA 9 rookie market has improved since May, much of the broader vintage card market is at a lower level. A bearish investor may find it difficult for the reasons above to accept the premium to the May sales.
Challenged memorabilia performance. As has been covered in previous editions of Bull Case Bear Case, sports memorabilia as a category has not fared particularly well on fractional platforms. Since inception, the Altan Insights Fractional Sports Memorabilia Index is down 37%, and the average sports memorabilia ROI on Collectible as of 1/27 is 0.89%. More specifically, game-worn baseball jerseys have been significantly challenged. Across platforms, the average ROI in the subcategory is -14.5%, and for those offered at valuations greater than $100k, the average ROI is -21.4%. This being the case, a bearish investor may argue that it is prudent to await secondary market opportunities at lower valuations.
1984 Macworld #1 (Signed by Jobs & Woz)
2/2 @ 12:00PM ET
Apple & Jobs appreciation. Apple memorabilia continues to be the subject of strong demand, recently garnering a slew of impressive results at RR Auction, where this item was sold. Results there illustrated a number of instances of improvement over prior sales. A Steve Jobs Apple business card sold for $12,905, a 135% improvement over the average of the last three sales in 2018. 2019, and 2020. This very magazine sold for $201k, a 321% improvement over the sale of another Jobs-signed copy in 2018 - in just two and a half years’ time. Of course, the addition of Wozniak’s signature here contributes to that disparity, though his auto is vastly more common, so the impact may be limited. Elsewhere, a hand-written job application from his time at Reed college that sold in March of 2018 with RR Auction for $174,557 sold in 2021 for 162,000 GBP, or $222k at the time. That’s a 26% increase, or 8% annualized. Even Jobs-worn Birkenstocks, yuck, sold for $2,750 at Heritage Auctions in 2016, only to garner an offer of $5,000 in May of 2020, which would have represented an 82% return if accepted. The rise of corporate and executive related memorabilia is a relatively nascent trend, with opportunities to grow and expand demand, and Jobs remains at the top of the stack in desirability.
Scarcity of key Jobs autographs. Steve Jobs was notorious for being reticent to sign items. For instance, the consignor (to RR Auctions) of this particular magazine made the request to have it signed alongside his plaque for five years of service to Apple. Jobs’ assistant replied: “No way, he doesn’t like to sign anything.” Fortunately it got done. The other signed Macworld #1 to sell at RR Auction in December 2018 holds a similar story, with Jobs being seen on video reluctant to apply his signature. It took RR Auctions, in business for over 30 years, until 2012 to offer their first Jobs autograph. As a result of this reticence, relative to other key cultural figures, the quantity of his autographs in the market is low. Five Jobs signed items sold at the RR Auction event in August for six figures, and the lowest price of a Jobs signed lot was $23k, for a program for an event at which Jobs spoke - bearing very little connection to Apple or meaningful historical significance of any kind. For those bullish on Jobs and Apple assets, opportunities to own items of true significance bearing his signature are limited, and with this being the first issue of MacWorld and also bearing the signature of Steve Wozniak, it handily meets the significance criteria. This marked the first of over 350 print issues of MacWorld over the course of 30 years, and the company still exists today as a website.
Fractional Apple performance. To date, there have been five Apple-related memorabilia items that have IPO’d on fractional platforms and started to trade. The average ROI of those items is 98.2% as of 1/28/2022. Just one item, the Apple I Computer, has generated negative returns to date (-32%). That item funded with an $825k market cap. Three additional Apple/Jobs items have been funded since, including an Apple Lisa Computer, an iPad prototype, and a Steve Jobs jacket. In total, that’s over $1.1mm in total IPO proceeds for Apple memorabilia. These figures are demonstrative of a clear and robust fractional demand for items chronicling the rise of one of the world’s most iconic companies.
Other Apple opportunities. A bearish investor may prefer the other Apple opportunities - particularly at lower valuations - on fractional platforms to this one at a $225k level. The MacIntosh Plus Computer, also signed by Jobs and the Mac team, currently trades at a $187,500 valuation, and may present a more museum-quality asset. A bearish investor may feel the more nascent sealed iPod and iPhone collectibles provide greater upside, while an established asset like the Apple I Computer, particularly down over 30%, provides greater downside protection and risk-adjusted opportunity.
Short term frictional costs. The sourcing fee is by no means large as a percentage of the proceeds at 7.87%. However, nominally speaking, a $17,711 sourcing fee for an item purchased at open auction may be off-putting to a bearish investor who does not feel the approximately 12% total markup vs the RR Auction result provides shareholders with strong short-term upside.
Potential Premium. As highlighted within the bull case, Apple memorabilia has experienced tremendous appreciation over the last twelve months and was even highlighted in an article published by Altan Insights in August. Anytime new money flows into an asset class, investors usually need to pay a slight premium versus market value due to the sudden rush of attention into the space. This offering is a prime example of that as this copy of Macworld #1 is currently the top of the Macworld market. Actually, the $201,021 sale at RR Auctions was the top of the current Macworld market, and this $225,000 market cap is 12% higher than the current public ceiling for a first edition publication. Heading into that RR Auction, no copy of Macworld had ever sold for six figures and a pre-auction appraisal would have pinned this magazine between $50,000-$100,000. The final hammer price was justified when compared to the appreciation of other Apple memorabilia, but whether or not the next Macworld #1 to sell at auction will display similar valuation growth is to be determined and highly uncertain.
2/2 @ 12:00PM ET
Italian Blue-Chips. If French wine is Mantle or Honus, it should be fair to call Italian wine Gretzky or Gehrig. Historic returns for Italian wines might fall a tier below some of the top estates in Burgundy or Bordeaux but there is no question Italian vino has established itself as a blue-chip investment product. This collection features two of the biggest names in Italian vino with Barolo and Barbaresco which have delivered a rightfully earned reputation of producing wines that are appreciated by collectors and critics alike. Investors looking to reduce risk often seek out vehicles that have a history of credible returns and limited long-term downside risk. This offering provides both of those with a basket of the most respected and traded wines from north west Italy.
Barolo’s Bounce. Nearly 63% of this offering is Giacomo Conterno Barolo Monfortino Riserva with 34% of that coming from the 2014 vintage and 27% from 2013. No Italian estate has experienced growth like Barolo as the red wine has become a favorite among brokers and merchants. Barolo trade volume has increased by a 5x multiple over the last six years on Liv-Ex and multiple vintages have earned a spot in the Liv-Ex Italy 100 Index. The 2013 vintage specifically was awarded 99 points from esteemed critic Antonio Galloni who called the production “brilliant, precise, focused and nuanced”. The 2013 Riserva Monfortino burst onto the global scene in the first quarter of 2020 after it was among the most traded wines by value, matching the likes of Tignanello and Dom Perignon.
Fair valuation versus recent comps. Vint acquired this collection for $137,000 and the offering will open to investors at a 12.77% premium. Based on recent prices the collection of 186 bottles would appraise between $150,000-$160,000, and that is before costs and taxes are added to the total fair market value. While there are plenty of online sites that advertise prices of single bottles of Barolo or Barbaresco wines, that is an inaccurate way of establishing an appropriate valuation. Instead, we emphasize public auction and merchant sales of quantities that include at least 6 bottles per transaction. For example, Zachy’s sold multiple single bottles of Barolo 2013 in their December auction for less than $800 but any lot that included at least six bottles sold for 40% more per bottle. The estimated value provided is based on recent sales for lots that featured at least 6 bottles with a higher weight assigned to transactions for more than 12 bottles. The lack of expenses to the investor also adds value as a traditional buyer on the public market is usually responsible for duty, taxes, shipping, and storage fees.
Idle returns. Trading volume for Italian wines has grown over the last decade but after a breakout 2020, performance lagged in 2021. The one year return for the Italy 100 index was 13.87% which outpaced indices for Bordeaux but trailed those for Burgundy and Rhone. The one year return for Luciano Sandrone Barolo Le Vigne, which makes up 5.46% of the offering, was -1.57% and for Barbaresco Riserva Asili, which is 8.44% of the collection, the ROI was 5.8%.
No more tariff help. Italian wines experienced incredible growth in 2020 but that expansion was aided by an absence of tariffs for the Mediterranean country. Rival regions throughout Europe were hit with a 25% tariff imposed by the United States from October 2019 through March 2021 which helped Italy secure the top spot among traded value for US merchants. This was a bullish case for Italian wines in 2020 but the suspension of tariffs has opened the door for Bordeaux and Burgundy to increase their volume and recapture market share that was lost to Italy. This factor alone played a major role in boosting prices for Italian wines but when the tariffs were removed, valuations pulled back. At this time, it does not seem like the tariffs will be reinstated but they were a strong reminder of how much political decisions can influence fine wine prices. Italy managed to withstand the most recent wave of excess taxes but will no longer benefit from tariff impunity relative to other regions.
Limited Catalysts. Some of Vint’s offerings like their St. Emilion Collection have included wines like Figeac which provided investors a potential catalyst with the upcoming 2022 reclassification. The wines in this offering are established Italian brands that have delivered stable returns but are not necessarily lined up for any near-term breakout. This is good for an investor who is looking to use wine as a steady growth asset class but might not be as attractive to an investor that is looking to find investments with 2-3x multiple potential. Italy is a developed wine country similar to France, and while there are still regions within those blue-chip countries that have breakout potential, Piemonte is a safer bet with less upside. Investors looking for a higher risk/return ratio might be more inclined to seek out wines from emerging markets like South Korea or New Zealand.
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