In a recent interview with The Wall Street Journal, actor Leonardo Dicaprio was asked by Kelly Crow about his passion for collecting items ranging from comic books to fossils. Dicaprio was asked in "How Leo Got his Name":
Did you collect anything as a kid?
I collected baseball cards. I still have boxes of them, but they aren't worth a dime.
The same has undoubtedly happened with those who collect posters, comic books, music gear such as instruments and speakers, and other cherished items. But there is a better, and more profitable, way: rather than collecting loud speakers or comic books, buy the stocks of companies that make the products.
There is a wide choice, ranging from mega-caps such as Walt Disney, (NYSE: DIS), which owns Marvel comic books, to medium caps like Gucci (OTC:GUCG) and small caps, like The Guitammer Company (OTCQB:GTMM), which makes ButtKicker®-brand low frequency audio transducers that are so valued by those into music and movies. Think of this as investing like Warren Buffett, not like Warren Sapp.
Warren Buffett, considered by many to be the greatest investor of all time, is worth over $50 billion. Warren Sapp, the Hall of Fame defensive tackle and commentator, recently filed for bankruptcy with 235 pairs of Air Jordan sneakers listed as "assets." Sapp would have been much better off buying shares of Nike (NYSE: NKE), which makes Air Jordans, rather than hundreds of pairs of the shoes which, no matter how venerable an asset, are not very liquid.
Ironically, Buffett prefers to buy shares of companies that sell everyday products. These are the very items that often become collector items. Until a short while ago, Buffett owned more than 3 million shares of Nike.
A ready buyer with a stated price is just one of many reasons to buy shares of a publicly traded company rather than the collectibles it produces. The brand names are powerful, too: in its most recent survey, Brand Finance rated Ferrari, the legendary sports car maker, as having the most powerful brand name in the world, besting firms far larger in size and scope such as Apple (NASDAQ: AAPL) and Coca-Cola (NYSE: KO). This brand power of these companies producing collectibles also makes them very attractive for takeovers:
- Topps, the maker of baseball cards, was bought by Michael Eisner's Tornante Company and Madison Dearborn Partners;
- Maserati, another Italian sports car maker, was purchased by Chrysler; and
- Jaguar, the venerable British automobile company, was once owned by Ford (NYSE: F) and is now a subsidiary of Tata Motors (NYSE: TTM) of India, which bought it in 2008.
It would also be profitable to buy into the market itself. Both eBay (NASDAQ: EBAY), up 8.40% for the last six months, and Amazon (NASDAQ: AMZN), higher by 11.35% for the same period, rather than the collectibles sold through these on-line exchanges. As an example of this, Amazon and eBay each have entire sections dedicated to vintage speakers. Many have zero bids. For just one case, there are vintage Tannory Monitor 12-inch loud speakers for sale with an asking price of $599.99 at present on eBay. There is not a single bid.
By contrast, The Guitammer Company, a small-cap, still has an average daily volume of almost 18,000 shares for the last three weeks . That may not be much when compared to the millions of shares traded daily for Walt Disney, Nike, eBay, Amazon and others, but it certainly beats the bid of zero and the ask of $599.99 for the Tannory 12-inch loud speakers!
If you want to invest to profit from the collectible sector, The Guitammer Company offers the best pure play. It focuses completely on enabling audiences to feel movies, music, video games & live sporting events. Its award-winning Buttkicker line is highly valued by the entertainment and home theater industries. Its Indian partner, Recliners India Pvt. Ltd., just won the prestigious "ET NOW Leaders of Tomorrow Awards 2012 in the Home Décor & Handicrafts Category." That increases the appeal of the products from The Guitammer Company to the national with one-sixth of the globe's population and the world's largest middle class.
For generating income from investing in collectibles, there is no pure play in these companies, but the dividend incomes from Nike and Disney more than compensate as shown by the table below:
With such low payout ratios, both Nike and Disney have ample cash flow to raise the dividend and initiate stock buyback programs to reward its shareholders. But what is perhaps the most rewarding is knowing that the value of the holding will rise from the enduring quality of the product when it is recognized by both investors and collectors. The best way to collect is shares of the company, not the product. This has been demonstrated by both Warren Buffett and Warren Sapp.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.