How to find a Bargain Slab

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As you know, some collectibles are professionally graded by grading services.  These items are typically assigned a verbal grade, like “Fine” and then a numerical grade, like 15.  Coins and currency are graded on a 70-point scale with 70 being the highest.  Comicbooks are graded on 10 point scale using decimals (e.g., 8.5, 9.0, 9.2, etc).  I think baseball cards are graded the same way.  Professionally graded items are sealed in tamper-proof plastic containers sometimes referred to as “slabs”.

Some items are too rare in the marketplace to easily spot a bargain for the simple reason that they don’t come up for sale very often.  And when they do come up for sale, their difference in condition makes comparison of past pricing difficult.

For the items common enough to have more than a few examples, but still maintain their desirability due to a general popular appeal, bargains can be found by using the following procedure:

1. Compile a list of the prices and numerical grades for an item.
2. Divide the prices by the numerical grade to obtain a price per point.
3. Use the price per point to recognize a bargain.
4. Understand that this typically only works for lower and mid-grade items, but can be still be used for higher graded items when a really good bargain exists.

Here’s an example.  Let’s say you were looking for a slabbed version of a $10 1928 Gold Certificate Note (Paper Money).  For simplification, let's say you were only looking for a PCGS slabbed note.  As of the time of this writing, here are some actual on-line auction “buy it now” prices and grades for PCGS slabs.  I’ve sorted them in price order plus shipping rounded to the nearest dollar.  Some items have been assigned a PPQ (Premium Paper Quality) designation which is like "star rating" that we’ll ignore for now.  Here's what I found:

Fine 15 PPQ $110

Very Good 10    $115

Very Fine 20  $142

Very Fine 20 PPQ $150

Very Fine 25 (make offer) $169

Very Fine 25 (make offer) $169

Very Fine 25 (make offer) $169

Very Fine 30 PPQ $195

Very Fine 25 $199

Very Fine 25 $225

Very Fine 25 $229

Very Fine 25 $234

Extremely Fine 40 $332

Extremely Fine 40PPQ $346

Extremely Fine 45PPQ $386

Etc.  (It goes on..)

Now, let me say a few things.  This procedure assumes all these notes are properly graded.  I have a lot of faith in PCGS’ grading ability, but I’m neglecting the appearance of the notes.  Some will be strong for their grade and some will be weak.  But hopefully this technique will be a starting point for making a final decision.

OK, back to the list.  Common sense tells us we can eliminate some of the entries because they are obviously not a bargain.  After paring the list down, we get this:

Fine 15 PPQ $110

Very Fine 20  $142

Very Fine 20 PPQ $150

Very Fine 25 (make offer) $169

Very Fine 30 PPQ $195

Extremely Fine 40 $332

Extremely Fine 40PPQ $346

Extremely Fine 45PPQ $386

Ok, looking at the list, you can see that the prices are running at about $7 a point.  For example, 7 x VF25 = $175, which is in the ballpark of the $169 asking price.  Also, $7 x VF20 = $140, which is close to the $142 asking price in that grade.

So let's compare the prices to our $7 estimate:

 

A F15 should be (15 x $7) or $105 or less.  They want $110 but it's a PPQ note so we're in the ballpark.

A VF20 should be (20 x $7) is $140…so…it’s very close, but FAILS

A VF20 PPQ also needs to be $140 at $7 a point…its close, and maybe that PPQ is worth the extra $10.

VF25 (make offer) x $7/point should be $175…it is $169 so it passes.

VF30PPQ x $7/point = $210…it is $195, so it passes with flying colors

The Ex. Fine 40 x $7 point should be $280…it is $332, so it Fails.  However, when you start getting into the higher grades, you need to re-evaluate.  Points get more expensive.  In the Ex. Fine grade, the points may cost about $8.50 each. If so, at $8.50/point, the EX. Fine 45PPQ should cost $382, so it is accurately priced.

So in summary, where was the bargain? No screaming bargains there.  But if wanted a mid-grade, I like the VF30PPQ.  It should be $210 without the premium for the PPQ designation and it only costs $195.  

If your pocketbook is a little thinner, the VF25 (make offer) might be the way to go unless you only collect PPQ notes.  And bear in mind that some of them didn’t even make the $7 per point cut-off.  Because the seller is asking for offers, maybe you can push your purchase price even harder.  Also, the same seller is offering three of them, so maybe he’ll be more likely to give you a deal.

Does this technique work?  Yes.  I’ve found some slabbed items at ridiculous prices in the past…some at less than 70% of what they should have been.   It’s especially handy if a market is temporarily soft because of a temporary glut of items for sale.  To figure out whether you’re in a glut or not, you have to do your research.

Lastly, I want to make it clear that my search only looked at PCGS slabs.  There are other slab companies…some with good and some with bad reputations.  To run this analysis properly, you need to also run it across various slab companies.  Here’s a suggestion for how to do that:  Search on the key words “1928 gold 10 15 20 25 30 35 40 45”.  The different numerical grades will be applicable across all slabbing companies, but you’ll probably pull up other denominations such as the $20 bill, the $50 bill, etc. which must be ignored.  This is technique is a good starting point to find a bargain.

Epilogue:  After writing this article, I presented it for peer review to a group of collector friends.  A few points need to be stressed:
1.  This method is not a price guide.  In fact, it is only valid in the forum you are in.  For example, you may get different results if you are using this method to compare prices realized at old Heritage Auctions compared to Ebay Buy it Now prices.
2.  Auction Buy it Now prices are not necessarily the cheapest way to obtain items.  For example, you can run this analysis on buy it now items and still get a better bargain if you bid in an ebay auction that is closing.  However, the analysis will give you an idea of how high you should bid.  For example, it would be tragic to bid higher than the price of a comparable item readily available with buy it now.
3.  All slabbed items are not the same.  Remember, this is a tool to narrow your search.
4.  One person pointed out that this method effectively reverse-engineer's the Sheldon Scale.  (google that if you don't know what it is).  He is right...the Sheldon scale still works at lower grades on a proportional basis.  This method tends to stop working at the grade of Extremely Fine, or...stated another way...at the point where the problems associated with the item are extemely small in nature but still pervasive.