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Cherrypicking Dealer Stock
 | By Mike Thorne, Coins Magazine
July 15, 2008 |
In Helpful Hints for Enjoying Coin Collecting, Bill Fivaz defines "cherrypick" as follows: "to purchase a coin with a variety on it (unbeknownst to the seller) for the normal price of the coin. The variety usually makes it more collectable or valuable. This term may also apply to purchasing an undergraded coin at the lower price."
This is something we all want to do, right? Whether we're buying a new car, groceries at a neighborhood store, or coins at a coin show, we all want to get a bargain. Nobody wants to pay full retail price for anything anymore.
So how is this possible in the case of rare coins? How can you buy desirable coins for bargain prices? The answer, in a word, is knowledge. In order to be able to spot a coin that's under appreciated and thus underpriced, you need to know more about it (its unrecognized variety, its true grade) than the seller.
Unfortunately, I know of no courses you can take to acquire this knowledge, and you're unlikely to find someone who will mentor you in this area. Painful as it may sound to those of you who didn't (or don't) like studying and homework, that's what it's going to take for you to gain the knowledge you need to cherrypick successfully. For openers, you're going to have to acquire a numismatic library and read and study it diligently.
But what books should be in your library in order for you to learn to cherrypick? Obviously, I need to be much more specific.
To begin, I would advise you to buy copies of each of the major grading guides. These would include the The Official American Numismatic Association Grading Standards for United States Coins, (6th edition), New Photograde, and Official Guide to Coin Grading and Counterfeit Detection (2nd edition). Of course, it should go without saying that you need to study each of these books thoroughly, paying particular attention to the coin series in which you're most interested.
Actually, that brings up another important point: I think that it's worthwhile to specialize in one or a few series if you're interested in cherrypicking. Personally, I'm much more of a generalist than a specialist when it comes to U.S. coins. That is, I tend to like them all, although I will admit that I like some series (their designs) better than others.
My favorites would have to include Walking Liberty halves, Buffalo nickels, Lincoln cents, Indian Head cents, Indian Head gold $2.50s and $5s, Barber coins of all denominations, and Saint-Gaudens gold $20s, not necessarily in that order.
I think you will agree with me that it's easier to learn a lot about a few things (one or two coin series) than it is to learn a lot about many things. And that's what you need to do to be a successful cherrypicker: learn a lot about whatever you want to cherrypick.
Let's assume that you want to cherrypick Buffalo nickels and are planning to go to a large coin show in a few weeks. You have the grading guides I've recommended and have studied each of their sections on grading Buffalo nickels. From Photograde, for example, you've learned that the date and "LIBERTY" are important grading features on the obverse of the coin, whereas the buffalo's horn is a key grading feature on the reverse.
At the end of the section on grading Buffalo nickels, be sure to read the italicized note, which mentions that a number of issues came weakly struck to begin with. That is, before they even left the Mint, there might have been weaknesses in the key grading features. The note even cites the 1926-D as a major example of weakness in the horn and tail on the reverse and "LIBERTY" on the obverse. I've written on a number of occasions about seeing a roll of uncirculated 1926-Ds, none of which had more than half a horn.
This is crucial knowledge to acquire, of course, because it means that if you happen upon a well-struck 1926-D in a dealer's stock at a coin show that's priced like an average 1926-D, it may be an incredible bargain. I said "may be" because there's another possibility: It's a 1926 to which someone added a "D" mintmark.
But here again specialization in the series will pay benefits. If you've seen dozens or even hundreds of Buffaloes of this date, then you'll be more likely to spot something that doesn't have the correct look.
The 1926-D Buffalo cited by Photograde is but one of several dates that often come weakly struck. If you want to find a list of many of the worst offenders in this regard, study the end notes for the series in the ANA guide.
One offender that I made money on many years ago was the 1913-S Type 2, which is now considered the major rarity key to the series. In The Complete Guide to Buffalo Nickels, David Lange writes that weakness in striking "is most evident in the legend LIBERTY and in the date."
At one point during my career as a part-time mail-order dealer, I bought several 1913-S Type 2s from an old-time dealer who graded well-circulated Buffaloes by the number of digits in the date. If a coin had fewer than four digits, he called it About Good and priced it accordingly. The coins that I purchased from him as AGs had at least half a horn, which meant that they were at least Very Good in terms of the length of time they had circulated. In fact, they had almost certainly left the mint without a full, four-digit date.
Although I've focused on Buffalo nickels in my discussion to this point, I don't want you to think that that's the only series that can be cherrypicked in terms of grading. Grading nuances can be found in every series if you know what to look for. If you have the knowledge, that is.
The Walking Liberty half dollar is another coin that I've found can be cherrypicked gradewise. One design feature that many graders of the series focus on is Liberty's breast, because it is a high spot on the coin and thus subject to first wear. It's here and on the eagle's breast on the reverse where you would expect to see wear that would distinguish an uncirculated coin from one that's just about uncirculated.
At the lower end of the grading scale, the amount of the breast's outline on the obverse is often used to distinguish a VG coin from one that's Fine and an F coin from one that's Very Fine. But because no two coins ever have exactly the same amount of detail on them after they've been in circulation for some time, there can be some fuzziness in how grades are assigned.
Sometimes the grading guides add to the confusion. For example, in the ANA guide, the description of a VF-20 Walking Liberty half dollar includes the statement, "Breast is outlined." For VF-30, a choice VF coin, the obverse description includes the sentence, "Outline of breast can be seen." Now I ask you, what's the difference?
Of course, the book is not grading a coin, a person is. And some people are much more conservative when it comes to grading than others are. If you're going to cherrypick coins from dealers at a show or in a shop, you need to find a dealer who both grades conservatively and prices according to the low grade he or she has assigned.
Actually, what you'll find is that dealers (and collectors as well) are more likely to be liberal in their grading than conservative. This is particularly true when the value difference between grades is large, which is often the case with the better dates in a series.
Perhaps I should have stated at the outset of this article that cherrypicking is not all that easy. Obviously, if most dealers tend to overgrade their material rather than undergrade it and then to price it in terms of their "optimistic" grades, you're not going to be able to cherrypick every dealer by being a better grader.
The key is to find a dealer who often has interesting material to sell, tends to grade conservatively, and prices his or her wares according to the grades he or she assigned. From my experience, such dealers are few and far between, but they do exist.
A few years ago, I discovered a dealer on eBay who fits the criteria I've listed. One of the first coins I cherrypicked from him was a Seated Liberty quarter he had graded Extremely Fine. I bought it at auction and then sold it to a dealer at the next coin show I attended. The dealer paid me the AU wholesale price for the coin.
To give you one more example, I bid on and won a 1929-D Walking Liberty half dollar the dealer had described as a nice EF. In reality, from the pictures of the coin I thought it was better than EF, so I bid high and won the auction.
When I got the coin, I submitted it to Numismatic Guaranty Corp., and it was returned with a grade of About Uncirculated-55! I subsequently offered the coin on eBay and sold my $60 cherrypicked bargain for more than $170. Needless to say, I always check out this particular dealer's new offerings.
Note that I've been talking about looking at "raw" coins at a convention, coin shop, or online, coins that are uncertified. The same grading principles apply to slabbed coins, although usually they're not as blatantly misdescribed as are some uncertified coins. Still, you can find certified coins that are harshly graded just as you can find some that are graded too liberally.
As just one example of what I consider harsh grading, I currently own two 1913-S Barber quarters, each certified by a major service. Both services assigned a grade of AG-3.
The two coins could be twins. Both have wear into the stars on the left rim of the obverse and wear into the tops of the letters around the right rim on the reverse.
Otherwise, all detail is clear and strong, and the color of each is appropriate for a well-worn Barber quarter. I have seen many pictures of 1913-S quarters graded AG-3 or Good-4 by major services that were not as attractive as the two coins I have.
Do you think that coins that look like mine are undervalued if priced as typical AGs? Which would you rather have: an ugly G-4 or a super nice AG-3?
Of course, the type of cherrypicking I've discussed so far is not the kind that most people think of when they see the term. Most collectors think of cherrypicking as finding unattributed varieties in dealer stock at a show or shop.
To be successful at this type of cherrypicking, you need differential knowledge. That is, you need to have knowledge that the seller either doesn't have or doesn't want to spend the time to apply.
Once again, you'll almost certainly have to acquire this kind of knowledge from books. As a place to start, you might want to look at the latest edition of A Guide Book of United States Coins, also known as the Red Book.
For example, if you think you would like to cherrypick Washington quarters, the Red Book lists the following varieties: 1934 doubled die, 1934 light motto, 1934 heavy motto, 1937 doubled-die obverse, 1942-D doubled-die obverse, 1943 doubled-die obverse, 1943-S doubled-die obverse, 1950-D/S, 1950-S/D, 1979-S filled S, and 1979-S clear S. A few additional varieties, such as the 2004-D with extra leaves (high and low), are mentioned briefly in footnotes.
But the Red Book varieties are just the tip of the iceberg. For a lengthier list, you'll want to consult Bill Fivaz and J. T. Stanton's Cherrypickers' Guide to Rare Die Varieties of United States Coins, Vol. II of the fourth edition. Believe it or not, I counted more than 125 different varieties of Washington quarters in Cherrypickers' Guide. Additional sources of information about die varieties on Washington quarters include John A. Wexler and Kevin Flynn's The Best of the Washington Quarter Doubled Die Varieties and Q. David Bowers' A Guide Book of Washington and State Quarters.
Several years ago, DLRC Press, in Virginia Beach, Va., published a lengthy series of guides to single coin series. Each book was titled, appropriately enough, The Complete Guide to&. Some of the series covered included Buffalo nickels; Liberty Seated half dimes and dimes; Barber dimes, quarters, and halves; Mercury dimes; and Walking Liberty halves. If you can find any of these at used book stores or at coin shows, buy them if you're interested in the particular series covered.
Also, if they're reasonably priced, you might want to buy them even if their subject is not one in which you're interested. I just looked on Amazon and found some of the out-of-print titles listed for astronomical prices: $150 and up for used copies!
I have quite a few additional books in my library devoted to die varieties in single coin series. For example, there's The Authoritative Reference on Three Cent Nickels, by Kevin Flynn and Edward Fletcher; The Authoritative Reference on Barber Dimes, by Flynn; and Treasure Hunting Liberty Head Nickels, by Flynn and Bill Van Note.
Finally, there's one additional avenue for cherrypicking I've discovered: eBay auctions with high starting prices. Of course, if you don't own a computer and have no interest in buying one, then read no further. Also, if you're like many people and think that everyone selling coins on eBay is a crook, then you've reached the end of this article. However, if you've discovered that there are both good and bad sellers on eBay and that you can often acquire nice coins online for considerably less than their retail prices, then read on.
When sellers list auctions on eBay, there are different routes they can take when deciding on a starting price. Some sellers start all their auctions, no matter what they're selling or how much it's worth, at some nominal price, such as one cent or 99 cents.
These sellers also don't employ a reserve amount (a price below which they won't sell the item) and depend on the "market" to achieve a reasonable selling price. From my experience in both selling and watching items sell on eBay, this generally works well, and the final price is usually appropriate for the item sold. As a corollary, if you're looking to "steal" coins from online auctions, you're probably just wasting your time.
Another pricing strategy that some dealers follow is to set an opening bid that's well above what the coin is worth. As you would expect, these sellers run lots of auctions that never result in sales. I guess they figure that if they sell even a few of their overpriced coins, they'll more than make up for what they spent auctioning coins that didn't sell.
And then there's the seller I like to patronize, the one who sets an opening price that's just slightly below what he's hoping to get from the sale of his coin. If the coin is fairly expensive (more than $100, say), then this approach often results in the non-sale of the coin, as bidders are typically reluctant to bid high at the beginning of an auction. The result can be that no one bids, even though the opening bid reflects what the coin is actually worth.
You can sometimes cherrypick this kind of dealer by waiting until the very end of the auction before inserting the opening bid. By doing this, you don't encourage anyone else to bid, and you may get the item for the opening amount. This is a case where if the dealer had started the auction with a lower bid, competing bidders might have taken the coin much higher than it went with a high opening bid.
So look for nice coins with high (but still reasonable relative to what the coin's really worth) opening bids, wait until the last moment, and then start (and hopefully finish) the auction. One example of this that stands out in my memory didn't quite work out the way I hoped it would.
My favorite dealer offered a raw 1893-S Morgan dollar, with a grade of F, for an opening bid of $1,999. I figured that this would be an auction that no one would open, so I planned to try to "steal" the coin by making the opening bid as time ran out on the auction.
Unfortunately, someone was actually brave enough to open the bidding at $1,999. I eventually won the item, but it cost me nearly $2,700. Still, that was probably $800 below the wholesale price at the time. I feel sure that if the dealer had started the auction at $99 or so, the final price would have been much higher than the amount I had to pay.
As you can see, there are several ways to cherrypick coins, either from dealers at shows or shops or online. All you need is differential knowledge, either about grading a particular series or about unattributed varieties or about how best to play the online auction game.
Good luck, and may the cherry you pick not be one I was after.
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