It’s hard not to feel a little surge of excitement when we hear that one of our clients has found old stock certificates in a drawer, or as part of the inheritance from Great Grandma Gertie.
The certificates themselves are beautiful artifacts. They are covered in ornate scrollwork and etchings that illustrate some aspect of the company’s product—from the stagecoaches of the B&O Railroad to the Gerber baby.
And each one is a mystery. Is it worthless paper, or is it worth millions?
As crazy as it sounds, not all stock certificates have the original purchase price on them, and brokerage firms were not required to keep records of the original value (basis) of stocks until 2008. If you want to know how much a stock certificate has appreciated, you’ll have to do some research.
It isn’t as simple as looking at the original price compared to the price today. Companies change over the years. They may be bought or sold, or divided up and incorporated into new entities—all of which can change the value, name, and even the amount of shares you own. All of this may happen on top of normal activities that change the value of a stock—like dividends being paid out, or stock splits and share buybacks.
When we have researched these cases for clients, we typically find that when stock certificates lay forgotten for years in an attic, there’s normally a reason. The company may not exist anymore. The stock owner may have forgotten to get new certificates with an adjusted value after a spinoff, and it may just be more trouble than it’s worth. Or as we found out once, the stock could have been an obscure company to start with that spun off into an even more obscure assortment of penny stocks—most of which suddenly stopped reporting to the SEC due to lack of resources. Not a good sign for your investment.
Even blue chip stocks are not immune: take Kodak for example. Despite being an industry leader for decades, the company failed to innovate as digital cameras rose in popularity. Kodak went bankrupt in 2013, was delisted from the New York Stock Exchange (NYSE), and for years it traded for pennies on the OTC exchanges. It was recently re-listed on the NYSE—but even if you were a true believer in Kodak and held on through the tough years, you would not have been rewarded. After Kodak emerged from bankruptcy, all of the old shares were cancelled.
This is just one story of many—remember Blockbuster, Time Warner, and Lehman Brothers? There is no way to predict who will survive the test of time. This is even more true for obscure old companies on those old stock certificates in the attic.
As fun as it is for research nerds like us to research your old stock certificates and figure out how a company evolved over time, time and time again it proves the risk of individual stock picking. This is why we rely on factors within our control, like low costs, rebalancing, tax efficiency, and diversification to create portfolios that are not dependent on any one holding, but instead protect investors for a wide variety of potential scenarios.
This is not to say stock certificates are completely worthless. You may find out a lot of interesting tidbits along the way—and the certificate’s value as a collectible may end up being worth far more than the stock it represents. Take this 1887 certificate from the Chadborn & Coldwell Manufacturing Co., with an engraving of a boy mowing the lawn. This is the company that would eventually become Toro, a $6.7 billion company that now provides outdoor equipment in over 90 countries. Some certificates even have historical significance—like this 1860 bond for the “Payment of Expenses Incurred in the Suppression of Indian Hostilities,” now worth nearly $3000. If you are interested in this, Scripophily.com has a fascinating collection of rare and unusual stock certificates, and includes in detail the story behind each rare certificate.
The old stock certificates in your attic may not be worth much as an investment. But if you discover an interesting story or historic artifact, it may just be priceless!
IMPORTANT DISCLOSURE INFORMATION
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