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Friday, October 18, 2013

Stocks, Bonds, or Barrels?

Ask any firearms collector if guns are a good investment and you're bound to receive a response in the affirmative. It's not exactly an unbiased answer, but it is still drawn from sound personal experience. Besides, wasn't the economy's most recent low spot in 2008? Haven't such indicators as the Dow Jones and the S&P 500 recovered nicely since then? What about gold? I keep hearing about its value skyrocketing.

These are reasonable questions from someone debating on whether or not to invest some money into firearms versus other more traditional investment vehicles. Of course, we're not talking about the stocks of firearms companies as investments (although those are doing quite well for themselves currently), but the firearms themselves. Are guns a good investment? Aren't all the "good ones" taken? Not so fast. Here's some information that might make you think otherwise.


1.  Values Are Up

Gun values are up and it's not just some bubble in the market. Yes, modern sporting rifles (a.k.a. "assault rifles") saw a recent price bubble, but over the last five years the vast majority of guns in their usable life have seen and maintained an increase in value. Guns past their "useful life" and in their "collectable life" have been largely gaining value for decades.

2.  Increasing Gun Values Exceed Other Market Increases

The examples we list below are only the beginning. While their values have increased, and done so at a handsome percentage, other genres of collecting make these look like small gains. Through research and careful selection, one stands to outperform even such vaunted standards at the S&P 500 and even gold! Haven't each of those investments vehicles been improving since 2008? Didn't the S&P 500 just experience a new record high this week? The answer to both questions is "yes," but the right guns readily show larger gains in leaps and bounds.

3.  You Can't Shoot Stocks

OK, so this may not be an apples to oranges comparison, but it's a huge plus to investing in guns. Firearms are useful beyond their investment value. You can display them, you can clean them, you can take them to shows, you can take them hunting with your old man, you can teach a youngster about them, and they're a lot easier to trade than stocks. Truth be told, you may not want to fire a high dollar firearm into which you've invested tens of thousands of dollars as you may harm the value, but many of the other activities still apply.

Guns can be enjoyed in ways other investments cannot. You may hear one collector excitedly telling another about a recent purchase that he has chased for years; you'll never hear that from a day trader. You might hear the pride in a collectors voice as he describes his collection; the only time you'll hear financial experts talk that way about a portfolio is if it makes money. In gun collecting, there's so much more than money, like history and the pursuit. Not only is investing in guns worthwhile financially, you can use them as tools as well as for recreation.

4.  Guns Are Tangible

This section isn't meant to be some "the sky is falling" message about our government or the stability of the world economy, etc. However, there is a lot of risk present to investors today: the Eurozone, a government shutdown, debt ceilings, recessions, defaults, and so on. It is in unstable climates that investors seek stability. One only has to look at the popularity of precious metal commodities in the last several years to know that people want finances that aren't just potentially vulnerable electronic numbers in a bank or on the stock market. People want things they can touch, things that they can hold on to and guarantee its security. Collecting firearms provides that opportunity. You can hold them, they're worth an increasing amount of money, and you don't have to worry about losing them if a bank or market collapses. 

Examples

Now, we're not licensed financial planners or sages of what the future may hold, but we can speak from the experience of selling over 22,000 firearms a year and evaluate some past information in an intelligent fashion. We are not licensed financial advisors.  Please due your own due diligence or contact a professional before making any and all financial decision.  We simply have the good fortune to possess loads of data and we're not afraid to use it. All data that we used to derive the information below was obtained in the following way:
  • We only used guns that are in 95-100% of their original condition
  • We attempted to eliminate as many "special" guns as possible (unique history, one-of-a-kinds, etc) since they can cause larger swings in value.
  • All dollar figures shown are a yearly average.
  • Values for gold, S&P 500, and Dow Jones are year end figures, except for 2013, which uses October 16 as its final day.
Keep in mind, the amount that you bought/sold a gun for may not match the figures that we provide below. Our figures are averages. They take into account many different finishes, barrel lengths, grips, calibers, serial number ranges, boxes, letters, and so on. These numbers are not published to a pricing guide of any sort, merely to indicate a rising trend in value for several of the most popular firearms that we have sold in the last 5 years.










 Last 3 years: 72.68%
 Last 6 years: 183.31%

There's more than a dozen Colt Pythons to choose from in our upcoming auction in varying barrel lengths and finishes.















 Last 3 years: 43.84%
 Last 6 years: 52.78%

This classic piece of American firepower, called "the greatest battle implement ever devised," has also enjoyed quite the rise in value over the last several years. Patton would be proud.















 Last 3 years: 123.52%
 Last 6 years: 107.93%

Colt 1911s have been a proven high riser for several years.  The numbers on the left don't even reflect the high dollar 1911s such as Singers, high condition first year production models, prototypes, and especially not the world record Singer than we sold in 2010 for $166,750.












 Last 3 years: 111.89%
 Last 6 years: 79.95%


There are over 15 different high end Model 12 shotguns to choose from in this auction!  They include two engraved and gold inlaid by Master Engraver Angelo Bee, several trap and skeet grade models, and of course some of the ever popular trench shotguns.








 Last 3 years: -9.39%
 Last 6 years: 52.24%

Despite gold's popularity and media coverage as a high performing investment, it still lacks the gain in value attached to many genres of firearms









 Last 3 years: 36.89%
 Last 6 years: 17.24%


The S&P is finally starting to look like its old self and is actually breaking some records as of late.  However, even considering that record breaking performance the returns still pale to that of numerous genres of guns.













Last 3 years: 32.79%
Last 6 years: 17.75%


Even at its historic highs, the mighty Dow Jones fails to match the growth of collectable firearms.






We could list guns, pictures, and charts for numerous pages, we could also spend an entire month comprising values and breaking them down and making them as specific as possible, but this is not a pricing guide.  What we are doing is drawing trends and averages by looking back at the data from hundreds of sales of the firearms selected.  As with any rise in value there may be a few segments left behind.  Even in a bull market, not every stock gains money or even gains every year.  However, by taking a step back and looking at those trends over a larger period, it becomes easy to see that guns have been a sound investment for quite some time.  This financial benefit comes almost as an aside to most people who buy guns simply to enjoy them, use them, and be a part of that community.  It's yet another added perk to do what you love.

Best of luck in your collecting, investing, and of course, your shooting.


4 comments:

  1. Think you got your bulls and bears mixed up in the last paragraph but the topic was interesting and timely. I believe there was a similar article published in the Wall Street Journal about 3 - 4 years ago showing the increase in value of a sample of collectable guns since the 1950s vs the Dow Jones 500. I wished I had saved it or could find it to show to some of my naysaying buddies. - R. Horn

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    Replies
    1. You are correct. Thanks for the catch. If you find that article, let us know! We'd be interested in reading it.

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  2. Interesting, and in support of what I have been saying for some time. The main thing (aside from the good caveats that you already mentioned) is condition, condition, condition. Buy one fabulous Python (or Luger or Broomhandle or Mauser Pocket Pistol) rather than 5 Fair Condition C&R .45s. The rate of increase for the good stuff will be jaw dropping, the other stuff will appreciate but it may take a lot more time.

    I have a rule of thumb: if you buy a firearm intelligently (ie. used, good price etc) you will be, on average, at break even in 12-18 months. In 2-3 years you will show a healthy profit.

    Finally, I would encourage people to not think of firearms as speculative investments. The AR boom has come and gone and AR's, unless collectable, are simply ugly tools whose value is fairly stable.

    Finally, finally, the question always is "is it too late?". That is should one actually buy a Python at today's prices?. I think so, provided you can get something of a deal. Do your research and try to find one that is reasonably undervalued. Then DO NOT HESITATE: go for it and don't look back.

    Another thing. If you start accumulating collectable firearms you have to think about storage. Rather than rattle on, perhaps our friends at RIAC could do a piece on that topic.

    Thanks for good information guys/gals.

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  3. I have been an investment advisor for almost 20 years and I have always preferred investing in guns.

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