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Sell-offs Spring Eternal? April Market Recap

Sell-offs Spring Eternal? April Market Recap
May 3, 2022
Dylan Dittrich

Fractional markets ended Q1 on a dismal note, and the start to Q2 was certainly no better. Of course, despite ongoing weakness, negative fractional performance remains relatively tame in comparison to the carnage in other areas of the investment world. More so than earlier in the year though, weakness was incredibly broad-based. Of the 100 assets tracked by the Altan Insights 100, 65 were down in April, with an average loss of 12.0%. Just 28 assets gained ground, but those that gained were up rather significantly (13.1% on average), which has been a common thread in 2022.

The index has yet to achieve a monthly gain in 2022, even in the midst of a flurry (blizzard?) of winter buyout activity. No asset was safe in April: the two largest losers in dollar terms were the Honus Wagner card on Rally (-$400,000) and the Brady Championship Ticket card on Collectable (-$387,000). No asset gained more than $300,000; the top gainer was the Wilt Chamberlain High School Uniform on Collectable, up $212,352. 

Three of the bottom five performers in the index (by percentage terms) this month were CryptoPunks, as the floor price for that project fell over 25% in April. Let that serve as a note of caution: whichever NFT project of the moment seems firmly and permanently entrenched at the front of the pack now may not remain there. On the flip side, three of the top five performers in April were sports memorabilia assets, including the aforementioned Wilt uniform, as well as the Kobe Final Game Hardwood, and the Tiger Woods Putter on Collectable (we hear there was a big Tiger sale recently?!). 

As is not uncommon in markets that are consistently weak (like this one), an equal-weighted index outperformed the cap-weighted index for the month, losing just 2.0% versus the AI 100’s 3.8%. The current divergence in YTD performance between the two indices is the largest so far this year, as illustrated below. Larger cap assets continue to be perhaps more vulnerable to selling pressure than their smaller cap counterparts, with a flight to quality offering little protection in the present environment. That said, traditionally, it hasn’t been a matter of a month or months that have made or broken many of those long-term, grail assets.

Heading into May, the allocation of the Altan Insights 100 is as exhibited below. Key shifts from last month include a 3% pickup in Sports Memorabilia, and turn back the clocks, because Cars actually gained 1% allocation while NFTs dropped 1%.  

On an asset class level, performance was broadly ugly once again. Just two of thirteen asset classes gained ground. Cars benefited from the massive Ferrari Testarossa buyout in the mid-to-late stages of the month, while Sports Memorabilia continues to plod along, buoyed by a raft of key 2022 sales. Sneakers had the worst April performance, thanks entirely to the Nike Air Mag returning to earth after inexplicably rising to an $800,000 valuation. NFTs and Trading Cards continued to suffer, and Sports Cards also had an off month. Notably, the strongest asset class of 2022, Comic Books, also pulled back in April.

On a year-to-date basis, the story is largely unchanged from prior months. NFTs, Books, Trading Cards, and Video Games are enduring a 2022 bereft of many bright spots. The short term outlook for Video Games did not improve in April after tepid auction results, and the other three categories remain pressured, likely as a result of the fact that they began the year that way; weakness in fractional has a tendency to beget more weakness. Comic Books, Memorabilia, and (surprisingly) Sneakers are the only three asset classes clinging to positive performance in 2022. 

As those indices are cap-weighted, we can also look at the average 2022 ROI across asset classes to get a better sense of performance on an unweighted (or equal) basis. The picture is slightly less discouraging here, as both Sports Cards and Sports Memorabilia are positive by this measure. The challenges at the bottom remain largely the same, and Memorabilia continues to be a much worse performer on an equal-weighted basis than on a cap-weighted basis. 

To get a sense of how broad positive (or in the case of 2022, negative) performance is, we can explore the percent of assets in each category trading up YTD. For most categories, this figure remains woefully bleak, particularly Luxury and Books. However, the exceedingly low percentages at hand there suggest that selling has been almost entirely indiscriminate, and therefore, there may be opportunities lurking in those areas. Comics, Sports Memorabilia, Sneakers, and Sports Cards boast the healthiest fractional populations, and that’s particularly notable in the sports categories, since those also carry the largest number of assets.

In April, Otis was the most challenged marketplace - much of this is owed to the Air Mag correcting. For the year, Collectable leads, while Rally continues to trail. Notably, on an average 2022 ROI basis, Collectable and Otis assets have delivered positive YTD returns, indicating that the large cap assets are the laggards on a platform basis as well. The opposite could be said of Rally’s stats, though the gap is smaller.

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