Over a 10 week period, I bought and sold 33 different Magic: The Gathering cards. In a previous article, I recapped some of the hits and misses after selling a majority of the cards. The final cards I was holding were likely to lose money and lower the overall profit. I ended the speculation test after attending the Star City Games Summer Convention in early June, 2019. This event was an opportunity to sell off any remaining speculations without incurring shipping costs or seller fees. In the final article of this series, I will review the overall performance and my thoughts regarding the test. A copy of my updated speculation sheet is available here.
I believe it is important to understand how to evaluate and measure performance. One method of evaluating an investment is by comparing its performance against a similar investment. However, I do not have specific information on the performance of other MTG speculation portfolios. Another option is to compare the performance of an investment against other investment opportunities. In my Masters of Business Administration program, we often use the S&P 500 market index as a benchmark for comparing an investment's performance. While the S&P 500 is not a collectibles market index, it is an alternative investment to MTG cards. I will use this market index to evaluate my speculation test performance.
The speculation test ran from April 3, 2019 to June 10th, 2019. An article on Seeking Alpha used a Monte Carlo simulation model to predict a 2.38% increase for the S&P 500 over the second quarter. Using this forecast as a baseline, I should expect my speculation test to achieve a profitable return higher than 2.38%. Otherwise, it would be a potentially better alternative to put $188.11 in a S&P 500 market index fund. I would like to note that this assumption does not account for the time it takes to buy and sell cards. Personally, I would goal a higher return than 2.38% to account for the additional opportunity cost of my time.
Between April 3, 2019 and June 10th, 2019, the S&P 500 increased by 13.33 points for a 0.05% gain. When looking at the entire second quarter, the S&P 500 increased 93.13 points for a 3.3% gain. The S&P 500 did not beat the forecast for my speculation test's time period, but it did beat the forecast for the entire second quarter. I will compare my speculation test results against the total quarter gain of 3.3% for the S&P 500.
Overall Performance Results
The speculation test consisted of cards bought for purchase, personal use, and with a promotional discount. I will share the overall performance results including and excluding certain cards to show their impact on net profit.
Overall Performance Including All Cards with and Without the Promotional Discount
The total purchase price for all cards was $188.11. The net profit of all cards was $20.06 or 10.7%. By adding in the credit card kickback of $2.71, the adjusted net profit is $22.77 or 12.1% A promotional discount of $6.56 was applied to Queen Marchesa and Lux Cannon. Adding back the promotional discount results in an adjusted total purchase price of $194.67. The adjusted net profit changes to $13.50 or 6.9%. Applying the credit card kickback of $2.71, plus 1.5% of $6.56, the net profit adjusts to $16.3 or 8.4%.
Overall Performance for Sold Cards
The purchase price for only cards sold was $166.64. The total net sales for the group of cards sold was $186.70. This sales total resulted in a net profit of $20.06 or 12.0%. Adding in the $2.39 credit card cash rebate at 1.5% results in a total net profit of $22.45 or 13.5%. This was my maximum return when looking at only cards that were bought and sold. By excluding the credit card kickback and removing the promotional discount of $6.56, the adjusted net profit is $13.50 or 7.8%. Adding in the credit card kickback, plus 1.5% on $6.56, results in an adjusted net profit of 15.98 or 9.2%.
Reflection of Overall Performance
Using the lowest calculated net profit margin of 6.9% (or 8.4% with credit card kickback), the speculation test performance beat the S&P 500 return during the same time period. In addition, I was able to earn enough money from the sales and kickback to cover my initial investment. The kickback of 1.5% helped raise profit margins by offsetting some of the purchasing costs. In totality, net profits and kickback covered the costs of the MTG cards I bought to keep.
One important component I have left out is the consideration of time. I spent many hours researching, buying, shipping, and selling cards. The amount of money I profited was not enough to make even half of minimum wage. If I had bought multiple sets of each card, I may have been able to make enough profit to cover my investment of time. I believe it is important to rationalize the amount of potential profit per hour of time. In the future, I would consider speculating on more expensive cards and purchasing sets that could sell for $25.00 or more on Ebay. Another point to consider is how much time it takes in other investments to produce the same amount of profit. Buying and selling shares of index funds over the Internet through a brokerage firm is less time consuming than handling MTG cards. While it is hard to compare the various investment risks, I do not have to worry about shares of index funds getting lost in the mail.
Market Watch provides statistical performance for the S&P 500 for various time periods. Looking the one year performance for the S&P 500 on July 7th, 2019, the index gained 9.27%. I believe this percentage is important as it sets a general benchmark for holding long-term speculations. If I was purchasing singles to hold for a year, I would only consider cards that had the potential to earn a net profit higher than 9.27%. Otherwise, I would consider investing my money in the S&P 500 index.
Regardless of the speculation test results, I had fun buying and selling MTG cards for a profit. There is a feeling of accomplishment calling a speculation target correctly. I also enjoyed compile data together to determine if a card was a strong speculation target. While my choices were not always right, I did have more success than failure.
According to www.dictionary.com, "a self-fulfilling prophecy is a prediction that causes itself to be true due to the behavior (including the act of predicting it) of the believer." I have noticed alarming increases in card price movement after Internet personalities and websites share Magic: The Gathering speculations publicly. An article on Quiet Speculation, by Sigmund Ausfresser, highlighted the dangers of buyouts and price retracing. My takeaway from his article is that artificial demand, fueled by hype, will not hold price increases in the long-run. A recent MTG finance related YouTube video published by The Mana Source has received over 77,000 views since June 11, 2019. The suggested MTG speculations were not all original ideas. In fact, multiple cards in the video were previously recommended by other individuals. Following the release of the video, I researched price movements for the Return to Ravnica Supreme Verdict and Core 2019 Scapeshift MTG cards. I wanted to see if these card prices were affected each time an online article or video suggested others to buy them. Information from MTG Stocks was used to gather historical data on average price changes for Supreme Verdict and Scapeshift.
Return to Ravnica Supreme Verdict
On May 6, 2019, Travis Allen recommended Supreme Verdict in his weekly article at MTG Price. Allen also co-hosts the MTG Fast Finance podcast. The average price of Supreme Verdict on May 6th, 2019 was $4.80. Two days later, Rogue Deckbuilder's Rogue Roundup #14 also recommended Supreme Verdict as a speculation. His video had over 3,600 views as of June 11th, 2019. The average price of Supreme Verdict remained at $4.80 on May 13th, 2019. Over the next week, the average price increased to $4.93. On May, 26th, 2019, The Mana Source published a video highlighting Supreme Verdict as one of the 10 best cards to buy now. The next day, the average price of Supreme Verdict jumped to $5.06.
One event worth noting is the Star City Games Modern Open in Louisville, KY held over Memorial Day weekend. Two copies of Supreme Verdict were in a Blue/White Control top 8 deck list for the Modern Open and Classic. This deck has been a top contender for some time and commonly plays two Supreme Verdict. In addition, Modern Horizons spoiler season was happening before and after the event. It was common knowledge that the set could dramatically change the Modern competitive landscape. Modern players were waiting for the full spoilers of Modern Horizons before making changes to existing decks. While the results of a large event and spoilers can greatly affect card prices, I believe these events had a small impact on the price of Supreme Verdict.
By June 3rd, 2019, the price of Supreme Verdict increased to $5.49. Later that week on June 4th, 2019, Rogue Deckbuilder published a video where he agreed with The Mana Source that Supreme Verdict was a good speculation target. Prices continued to climb to the current average price of $5.68 as of June 10th, 2019. The average market price for Supreme Verdict increased 18.3% in 5 weeks. Within a week following The Mana Source's video, the average price of Supreme Verdict jumped 12.9% out of the overall 18.3% average price increase during the noted time period.
Return to Ravnica Supreme Verdict Weekly Average Price Movements 5/6/19 - 6/10/19
Core 2019 Scapeshift
On April 11th, 2019, an article published by Quiet Speculation highlighted Core 2019 Scapeshift as a speculation target. The average price for Scapeshift on April 8th, 2019 was $8.24. By the following Monday, the average price increased 8.6% to $8.95. A few days later on April 20th, 2019, a Reddit user posted about Scapeshift on the MTGFinance subreddit. They claimed to have purchased multiple copies of Scapeshift, specifically the Morningtide version, and asked others for input. The post attracted 5 comments and 15 upvotes. On April 22nd, 2019, the average price of Scapeshift had increased again to $9.50. I was unable to find any other mention of the card as a speculation target between April 21st, 2019 and May 18th, 2019. However, the average price continued increasing to $10.54 on May 13th, 2019. By May 20th, 2019, the average price of Scapeshift was $11.14 or a 35.2% increase in 6 weeks.
During Memorial Day weekend, multiple copies of Scapeshift appeared in top 8 decks for the Star City Games Louisville Modern Open and Classic. I believe these event results had a minor impact on the price of Scapeshift for the same reasons mentioned about Supreme Verdict.
The Mana Source published a video recommending Scapeshift as a speculation target on May 26th, 2019. The following day, the average price of Scapeshift was $11.43. Nine days later, Rogue Deckbuilder published his video also agreeing with The Mana Source's recommendation for Scapeshift. As of June 10th, 2019, the price of Scapeshift was $14.43 or a 74.8% increase in 9 weeks. It is also worth noting that the average price of Scapeshift increased 36.0% during the 15 days following The Mana Source’s video.
One theory for Scapeshift maintaining an upward price movement between April 21st, 2019 and May 18th, 2019 is if Modern Horizons spoiler cards were leaked early. Content creators and online personalities received spoiler cards for Modern Horizons before their assigned reveal date. If this information was shared privately, it could give someone an advantage on buying copies of a relevant or synergistic card. One theoretical example could be leaked information regarding Wrenn and Six, a Planeswalker revealed on May 25, 2019. The card has some synergy with Scapeshift. Individuals with early knowledge of Wrenn and Six could buy copies of Scapeshift before new demand drives up the price.
Core 2019 Scapeshift weekly Average Price Movements 4/8/19 - 6/10/19
Analyzing and Interpreting the Data
Both Supreme Verdict and Scapeshift have some inherent demand as competitive MTG cards. Each card is used in established Modern decks. In addition, the cards see play in the Elder Dragon Highlander multiplayer format. Prices will naturally change over time based on player demand and speculation. Players do purchase cards found in top deck lists after major tournaments such as Magic Fests, Mythic Championships, and Star City Games Opens. However, the dramatic price increases over a short period of time appear to be driven by additional factors.
What stands out to me most about the historical price movement is the velocity of price increases. The largest average price increases for both cards from one week to the next occurred after The Mana Source published a speculation video. While I am unable to know the amount of people that read written articles, it is clear how many views a YouTube video receives. If 0.5% of the 77,000 views for The Mana Source’s video resulted in 1 purchased copy of Scapeshift, that would equate to 385 copies leaving the market. On June 13th, 2019, TCGPlayer had 252 copies of Scapeshift for sale across all sets and editions. If all 252 copies were bought on TCGPlayer, regardless of price, a triggered price spike would likely occur. TCGPlayer’s copies only account for 65.5% of the demand for 385 copies. Players would have to search other online vendors for any remaining copies to purchase. I believe this simple example illustrates the amount of influence a YouTube channel can have on MTG Finance when they amass as many subscribers as The Mana Source.
Rogue Deckbuilder’s videos received thousands of views as well. Based on the price trends, I believe that a non-zero number of viewers purchase his recommended speculations. The same logic can be applied to the articles found on MTG Price and Quiet Speculation. Any time someone with an audience publishes their speculation targets, there is a chance that a viewer will purchase a recommended card. The sample size presented is small as I highlight only two examples of card price movements. However, the price movement related to online videos and articles is compelling. My conclusion is that as audiences grow for an individual's MTG related financial content, there is a possibility that a self-fulfilling prophecy could occur.
Risks Associated with Self-Fulfilling Content
There are risks associated with following the advice given by others regarding speculation targets. As seen in the price movements for Supreme Verdict and Scapeshift, the individuals buying cards after information becomes public risk paying an inflated market price. Those who already own cards prior to a price spike have the best opportunity to maximize profits. If any of the individuals that published content surrounding the mentioned cards held copies prior to Memorial Day, they would have made double-digit profit margins selling copies in June. In addition, they would likely have the first chance to sell or buylist at the highest price because of already owning the cards. Other individuals that buy recommended speculations from online vendors must wait for their cards to arrive in the mail or visit a local hobby store. I personally assume any time a content creator or individual publicly recommends an MTG speculation target, they already own multiple copies of that card and want to see it increase in value.
There is additional risk for buying cards after a price spike due to price retracing. The individuals who bought and sold the cards last have a higher likelihood of losing money. I touched on price retracing surrounding the buyout of Queen Marchesa in a previous article. The average market price for the card prior to its buyout was $19.99. After the buyout, the average price moved to $38.97 on April 8th, 2019. Any individuals who already owned the card could have sold it for a healthy profit or buylisted to Card Kingdom for $24.00. As of June 13th, 2019, the average market price of Queen Marchesa is $28.08 with a buylist price of $12.00. When factoring 20% of the sale price as fees and shipping, the net price for selling a Queen Marchesa online now is $22.46. This means that any copies purchased for the average market price after April 6, 2019 will lose money when sold today.
*The information in this article is of my own knowledge and opinion. It is meant for informational purposes only. I am not a registered financial professional or trying to act as one.*
I originally bought $188.11 of Magic: The Gathering cards in April as a speculation test. I have currently sold about 56% of my speculated cards as of May 31st, 2019. Here is a link to my updated speculation spreadsheet. A key tab was added to better understand how to interpret the data. I have sold or buylisted a number of cards due to price increases, price spikes, and price stagnation. When buylisting, I divided shipping fees across all cards mailed to Card Kingdom in Seattle, Washington. While I have made money thus far, I also lost money on a few cards. Overall, my current net profit is $26.12 or a 20% return. I will cover some of the hits, misses, and observations during the first eight weeks of this speculation test.
Tithe Taker was bought at an average price of $1.06 and buylisted at a net price of $1.71. This 62% ($1.96) profit gain was attributed to its steady growth and new demand from the Unified Assault challenger deck. I covered my analysis and decisions on this card in the previous article. After selling the Tithe Takers, the buylist price rose to $2.00 each as of May 7th, 2019. I also correctly called Unbreakable Formation increasing in value. The buylist price for foils rose from $0.33 to $0.99 in three weeks. Unfortunately, I paid too much and sold the copy at a small loss. While I thought this card hit a price ceiling, the buylist price increased to $1.25 as of May 7th, 2019. It is easy to get upset knowing you could have made more money. However, you should always be happy cashing out for a considerable profit as card prices can easily decrease when buylist quotas are met.
Guardian Project was another successful speculation. I saw people talking about the power of this card in Elder Dragon Highlander. I also watched the price move from $0.35 to $0.75 in two weeks. On May 7th, 2019, copies were selling on TCGPlayer for an average price of $1.44. I saw foil copies selling fast on TCGPlayer and Card Kingdom with a low multiplier. I bought a foil copy for $3.15 due to the rising EDH popularity and buylisted a few weeks later at $4.45. This was a profit of 41% or $1.30. This card would have also been an excellent bulk buy at $0.50. Current copies of non-foils are buylisting for about $0.80 each. I would not attempt to buy deep into non-foils now. However, it may be a good speculation buying cheap foils for a long-term hold.
Queen Marchesa was a huge win off of a promotional opportunity. There was a Google Express promotion for 20% your first order in April. I was able to purchase multiple copies Queen Marchesa the day after it spiked in price for $17.10 each. I thought Queen Marchesa was going to be an easy flip. However, the buylist price quickly dropped from $24.00 to $17.25 as other people dumped their stock. The prices on Ebay and TCGPlayer began dropping steadily down to around $28.00. It became apparent that the demand for this card was inherently low. I listed the copies on Ebay for $27.99 each and ultimately sold all three for a net profit of 31% or $15.83.
I purchased four copies of Lux Cannon during the same Google Express promotion at a discounted price of $5.09 each. I patiently waited to sell them as prices kept rising from $9.00 to $10.00 over the course of a month. I tried selling the set on Ebay for $36.99, but had no luck. Finally, I buylisted each copy at a net price of $6.35. I was able to make a profit of 25% or $5.06 from the set. I learned that it is hard to sell EDH cards as a set of four when players need one copy. There was an opportunity to sell each card on Ebay for a maximum net price of about $7.25. However, I decided to accept the buylist price of $6.35 instead of taking the risk from mailing them without tracking in an envelop.
The largest losses came from cards that had a high buylist spread. Such cards included Rhythm of the Wild, Sheltered Thicket, and Unbreakable Formation. While two of them did increase in price, the spread was not enough to recoup my initial investment. The other issue with these cards is that I cannot sell them on Ebay or another platform for a reasonable profit. The price of each card is too low to sell outside of a face-to-face transaction. My only real outlet to sell the cards was by buylisting at my local store or an online vendor. I would caution buying cards where the current buylist price, including a store credit option, is not enough to cover your costs.
Another miss was selling the Gilded Lotus and Goblin Bombarment too early. I had flagged these cards as long term holds, but sold them a month after purchasing. I grew impatient that the card prices were not rising. Unfortunately, their prices increased a week after I buylisted them. Had I stuck to my original strategy, I would have doubled my total profits on Goblin Bombardment and Gilded Lotus. I recommend being patient when speculating on EDH staples and not try to immediately flip them for a profit.
The likelihood that I will earn a profit from a short-term hold is heavily influenced by a card's buylist spread. The closer my purchase price of a card is to its buylist price, the higher the chance I can make a profit. I have done well flipping arbitrage opportunities and Standard cards. Many of the EDH speculations have appreciated in value, but not all have reached an ideal price point. I will look to move some of them in June after a 60 day holding period. It appears that cards purchased with a high buylist spread, like Skyline Despot and Grafdigger's Cage, will not return a profit. The growth and demand for these cards is slow due to their limited EDH and sideboard use. There will probably be an opportunity in six to eight months where I can break even. If they reach a price point I can break even by taking store credit, I will buylist them.
In regards to buylisting, I have been fortunate enough to mail my speculations with cards from my personal collection to spread out shipping costs. Thanks to pooling cards together, the average cost per card mailed across the United States has been $0.045 cents. A negative consequence to buying inexpensive cards is the limited avenues of selling them for a profit. I either have to buylist cheap cards to a store, sell them in person, or trade them for other cards. It would make more sense in the future to buy larger quantities of low priced cards to ship together or sell as sets on Ebay. In addition, it was more time consuming selling three cards over $25.00 on Ebay than buylisting, organizing, and shipping many inexpensive cards to one vendor.
I want to highlight another topic of MTG card speculation. The condition of a card is very important when determining a card's selling price. Players and vendors can typically agree to a price for a near mint condition of a card. However, opinions start to change when discussing the price of a card with light play or heavy play wear. Some players are only interested in near mint cards while others are less concerned. Many vendors tell you in advance how much discounting they will take off of a buylist price for cards that are not near mint. I have been very particular about the conditions of cards purchased as speculation targets, especially foil versions. I also purchased some cards with light play wear that arrived as near mint. This increased my profit margin when I went to sell them. I recommend speculating only on near mint copies of cards since it is a universal price point among players and vendors.
I will continue to share updates on my speculation test as I sell more cards in June. In addition, I plan to discuss the topics of arbitrage and picking bulk in future articles. I may not have as much success selling the rest of my speculations, but I am pleased with my profit and performance thus far.
*The information in this article is of my own knowledge and opinion. It is meant for informational purposes only. I am not a registered financial professional or trying to act as one.*