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Condition & Grading

Condition

The importance of condition when purchasing stamps for investment cannot be overstressed.

Condition plays a pivotal role in determining the overall value of a stamp. Take two identical stamps, one in superb condition, the other poor. The former could be valued in four figures; the latter potentially deemed as next to worthless or, at best, allocated a ‘spacefiller’ price. Condition is all.

Stamps to avoid are those with tears, bends or creases, thins (usually the result of hinge removal where part of the stamp has peeled away), missing perforations, faded stamps and so on. However, investment grade stamps purchased through a reputable dealer, should be correctly described and in first class condition. Any faults, should be clearly stated; indeed, if the stamp is faulty in some way then it should be down to the fact that better copies are probably unavailable or only in limited number.

Photo crop (perforated B)

Centring

A poorly centred stamp does not imply a stamp in bad condition but will usually have an impact on the overall value of the item. The importance of ‘eye appeal’ should not be underestimated. Stamps are very visual items and collectors put a great deal of emphasis on overall aesthetics. Nearly all stamps are printed within a frame. If the design within the frame is poorly centred, the overall beauty of the stamp is compromised. This may not be the view of all collectors but there is no doubt that a well centred example will be viewed and valued more highly than an identical specimen that is presented off centre.

As stamp production progressed, the ability to manufacture well centred stamps continually improved: the later the issue, the more likely that centring will be good. Of course the opposite is true: early ‘classics’ will be far less likely to have healthy margins and equilateral sides all around. Perfect centring in these examples may well command a hefty premium.

Grading

Grading is the combination of condition and centring taken to an analytical level. Graded stamps are stamps that have been independently assessed and then scored for their ability to meet various criteria. The higher the score, the more coveted the stamp. Scoring is heavily weighted towards centring: in fact, a very well centred stamp in less than perfect condition may still score more highly than a pristine off-centre example.

Grading is very much a North American phenomenon with little impact elsewhere in the world. That said, dealers in most countries will apply some form of grading to describe their stock, albeit as narrative rather than a numerical score. Will the US system get adopted elsewhere? We shall have to see.

An important distinction between graded stamps and investment grade stamps is that the former is valued on its visual appeal and is likely to represent the very best amongst many similar stamps whereas the latter is likely to be valued on its scarcity rather than a purely aesthetic assessment.

A highly rated, graded stamp may be perceived as material suitable for investment – auctions of highly graded stamps have reached staggeringly high multiples of the base catalogue price and clearly there is demand. One needs to be alert to the fact that the value in most rare stamps is held in their scarcity to demand ratio. Rare stamps are just that: there are very few of them. Demand in graded stamps may be strong but they usually represent the very best amongst many other identical but less ‘superior’ items. If stamps that are as yet ungraded but of an equally high standard go for grading – and then score highly – this may then have an impact on the price of existing high grade stock as availability increases. The optimum combination is a stamp that is both rare and highly graded.

© Copyright 2008 Philatelic Investor

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