"Blue chip" is one of those funny terms that gets used time and time again.
Nowadays, it mostly refers to stocks in corporations whose reputations are for quality, reliability and making a profit in good times - or bad.
Which is why the recent news surrounding holiday giant Thomas Cook, once listed in the FTSE 100 index, is making such waves.
Thomas Cook's shares crashed by 75% yesterday. What's more, the company has revealed it needs another £100m to get through the Winter. In fact, it may have to raise as much as £400m to survive in the long term.
 Up and away... and back down again: whatever a company's long-term |
Of course, Winter is traditionally a "bad time" for holiday companies. Needless to say, Thomas Cook has some tough times ahead.
Indeed, in times like these it seems fitting that the term "blue chip" actually derives from Poker. As the great investor Peter Lynch himself once said...
"To me, an investment is simply a gamble in which you've managed to tilt the odds in your favour"
- Peter Lynch, noted Wall Street stock investor
Also bear in mind that Thomas Cook has 145 years of history behind it. Yet this counts for little in the stock markets.
Shareholders in British bread manufacturer Hovis (founded 1886) recently lost 33% overnight.
So why am I writing about falling shares on a website usually more concerned with rare collectibles like autographs, old manuscripts and historic stamps?
Well, more and more collectibles are also being referred to as "blue chips" nowadays.
The "blue chip" collectibles are coming to the fore as investors continue to embrace investment-grade alternative assets. Not as primary investments, it should be pointed out, but rather as excellent ways to diversify an investment portfolio.
So what are the "blue chips" of the collecting world? Well, here are just a few off the top of my head: Marilyn Monroe, Neil Armstrong, Pablo Picasso and John Lennon.
And here are a few figures to go with the names...
Over the last 12 months the value of a genuine, fully authenticated, Neil Armstrong autographed photograph has grown by 8.18%. While the value of a John Lennon autograph has grown by 5.04% in the same period.
In fact, the world's 40 most sought after autographs have shown an average increase of 14.84% per annum as witnessed by the PFC40 Autograph Index.
You don't need to be a financial genius to see this beats the 3% pa interest you can expect to get from a bank savings account.
That's one advantage which collectibles have over stocks. And here's another...
Stocks, by their very nature, will give you a bumpy ride...
"I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom"
- Peter Lynch
A company's fundamental value may prove itself in the long-term. But, in the meantime, you'll find yourself strapped to a rollercoaster. Even then, today's blue chip company could be tomorrow's damp squib - Thomas Cook being a case in point.
Investment grade collectibles, on the other hand, have historically proven themselves immune to general economic conditions and political vagaries. In fact, during the recent economic recession collectibles have continued to set world record prices as an increasing number of investors view them as a safe place to store wealth.
 Still THE MAN: Muhammad Ali is among the collectibles markets' "blue |
I've mentioned that the value of a genuine John Lennon autographed album page increased by 5.04% in the past year. The long term returns have proven even better, up by 799.3% over the past 11 years.
Lennon's values are on the rise as his legacy grows, and his rarest collectibles become even scarcer and more coveted.
How do you spot a "blue chip" in the collecting world?
There are various ways...
Firstly, look for items which are selling for multimillions at auction. LS Lowry art and Muhammad Ali memorabilia are two examples - both have scored World Record prices in recent times.
Another question you can ask: has a collectible like this featured in major museum collections or a big exhibition? Like the influential artist Louis Bourgeois, whose iconic Spider artwork recently turned heads on the streets of New York...
Even if you are buyer on a budget, it's possible to find lower priced collectibles linked to these "blue chips" (an original Louis Bourgeois etching once auctioned in New York for just $900, for instance).
But here I've only skimmed the surface...
If you'd like to find out more about how you can benefit by diversifying your investment portfolio with collectibles, then why not take a look at our special investment pages.
And if you'd like to know which items we are recommending to our clients please give us a call on +44 (0) 117 933 9503 or email info@paulfrasercollectibles.com
All the best, until next week
Paul
Paul Fraser
