The Four Basic Types of Ungraded Strategies

Editor’s note: What follows is an excerpt from Jeff’s new book The Modern Baseball Card Investor.

When it comes to ungraded cards, players in the game generally employ at least one of four basic types of strategies:

1. Case breaker
2. Case breaker/grader
3. Boxes
4. Singles

It should go without saying that in a game where autographs often come at a rate of one or two per box, you should not be buying packs out of opened boxes. For starters, it’s not very cost effective to buy individual packs, because they are generally wildly overpriced, particularly compared to boxes. But more to the point – and I’m not saying that people do this (but people do do this) – it’s quite possible (or probable) that if someone is selling packs, that the key box hit (the auto) has already been found.

This may or may not be the case at your local card store, but it’s simply not worth the money or the risk to buy packs, at least for the purposes of our game.

Case Breaker

A pure case breaker strategy is a purely rip and flip strategy – everything that comes out of a break gets sold, often before the break actually takes place. This can be done any number of ways – some case breakers pre-sell team lots (sometimes random teams); others pre-sell player lots (say, for all base cards and parallels, or in some cases only for autos, etc.); still others pre-sell sets and sell off the hits individually.

On the plus side, this is a potentially low-risk strategy given favorable conditions, particularly for established case breakers who can acquire cases directly from a distributor, and who have built regular clientele. The downside is that literally anybody can break a case and dump supply on the market, and consequently there are little-to-no barriers to entry. Worse, when it is profitable to simply break cases and sell the contents, new case breakers will be attracted to the market.

This results in the double whammy of not only further flooding the market with new supply and thus depressing prices for other case breakers upon initial release, but also pumping up pre-order demand and thus supply (given Topps’ policy of printing to order), depressing secondary market values even further.

As a general rule, a pure case breaker’s strategy often depends on turning around and selling what comes out of a break, rather than taking the time and risk of sending off cards to get graded. As such, these are generally the guys we are looking to buy premium color, ungraded singles from in those first two to four weeks after initial release.

Pros: A potentially low-risk strategy under favorable conditions
Cons: Time intensive; likely cyclical; conditions subject to competition, supply, and product; little-to-no barrier to entry; probably not as easy as it sounds

Case Breaker/Grader

Some case breakers will grade the gradable hits, while pre-selling sets or base card lots. Other collectors will break cases in search of gradable hits, and sell off much of the scraps after the break. Still other collector/investor types will grade anything gradable that comes out of a break, while selling off the scraps.

Assuming reasonable supply conditions, this concept of breaking cases in search of hits, grading the gradable hits (and other cards of value) while selling off everything else is essentially a perfect strategy. By breaking cases yourself, you vastly improve your chances of obtaining key hits without the risk of having someone else examine such cards and only selling the undesirables.

The downside to this strategy is that it can be very capital intensive if you aren’t pre-selling lots, and it can be very time intensive regardless. It can also be value destructive unless you have the time and will to sell off the unwanted parts, or under unfavorable market conditions.

Pros: Improve chances at obtaining hits without someone else searching it first
Cons: Capital/time intensive; can be value destructive unless you have time and will to sell discards, or under unfavorable market conditions

Boxes

Boxes are a bit like slot machines in that some are designed to have many lower value payouts, while others are designed to have fewer payouts with larger potential jackpots. Topps Chrome Baseball, for example, generally comes with two RC autos per Hobby box; however, these RC autos generally aren’t as valuable as the Bowman Chrome Prospects or RC autos which come at a lower rate (generally one per Bowman Hobby or three per Jumbo box) and have significantly more speculative checklists, but also have significantly higher upside.

And so on the plus side, if you’re into gambling, buying boxes can allow you to obtain potentially super high-end hits at a relatively low cost. The downside to opening boxes is that it can be an extremely high-variance exercise where boxes are often expensive and most of the “hits” wind up being duds. And even more troublesome is that (as discussed in Part VI: The Supply Chain and the Value Cycle) high-end hits become increasingly harder to hit with the widening auto checklists that come with increasing supply.

Pros: Can potentially obtain high-end hits at relatively low cost, much like a slot machine or a lottery
Cons: Can be high variance, particularly in sets where most “hits” are duds

Ungraded Singles

In this game of hits, our default strategy revolves around ungraded singles and lots. Buying ungraded singles directly is generally significantly more capital friendly than buying boxes or cases in search of hits. If done correctly, you can often obtain singles or bulk values. And once you’ve gotten a handle on the BGS grading standards and submission process, you will know which cards are gradable, while the ungradables you acquire can be held or resold, or in some cases returned to the seller.

The biggest risk with ungraded cards is that when you purchase singles or lots, you run the risk that the cards you acquire have already been searched through. Meanwhile, you also run the risk that the cards you purchase even from established case breakers may not have been handled properly.

Pros: Capital-friendly, bypassing box risk; can obtain single or bulk values; gradables can be graded, while ungradables can often be returned, or held and/or resold.

Cons: Cards are often examined, and player lots are often searched through prior to sale unless presold through case break; cards can be subject to over-handling.

Jeff Hwang is a gaming industry consultant and the best-selling author of Pot-Limit Omaha Poker: The Big Play Strategy, and the three-volume Advanced Pot-Limit Omaha series. Jeff’s latest book, The Modern Baseball Card Investor, was published June 30, 2014.  

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