Collectible Investments: Early U.S. railroad stock certificates

Stock hobbyists tend to be theme collectors, usually concentrating on individual industries. Railroading is one of the most popular specialties and certificates issued by 19th century U.S. lines are particular favorites. To a significant extent, early U.S. growth was a function of its ability to railroad, and that growth is reflected by the steady development of the rail industry throughout the 1800s. The first chartered American line was the Camden & Amboy, established by John Stevens in 1815. Several more outfits incorporated in the 1820s and built a number of short lines along the East Coast. By 1850, there were 9,000 miles of line in the United States. By the 1890s, there were over 130,000 miles. It is estimated that there have been more than 23,000 rail-related companies in North America and published compilations suggest that collectible certificates exist for about one-quarter of them.

The construction of several rail lines contributed to the rapid late 19th century development of Los Angeles. In 1885, the first line connecting the city with Pasadena was developed by the Los Angeles and San Gabriel Valley Rail Road Company. The scan above shows a handsome unissued and uncanceled certificate that would have been used to declare ownership of an odd number of company shares, at $100 each. The vignette depicts a steam engine pulling a train of cars through a pastoral setting, a common theme on railroad certificates. As an investment vehicle, the sample illustrated has been a steady gainer. Five years ago, you could pick one up for $50. Now, you'll have to pay about $90.

The second scan features an 1880s specimen certificate for $100 shares of the Kansas City, St. Louis and Chicago Railroad Company. The firm operated lines in an area now served by Kansas City Southern. Specimens are certificates that were kept by printers to show prospective clients the types of designs they could create. Many times they are the only copies of a particular certificate available, because the company redeemed and destroyed the issued versions. Specimens usually have no serial number, or display a string of zeros where the number would normally be printed. Five years ago, the example shown was a $100 item. Now, it goes for about $170.

The third scan shows an unissued and canceled certificate for 100 shares of the Chicago & South Western Railway Company. The sample dates from the early 1870s. The firm was established in 1869 to run a 271 mile line between Washington, Iowa, and Leavenworth, Kansas. The certificate carries the prominent orange imprint of a 25 cent Internal Revenue stamp. The tax applied to stocks and bonds, between 1862 and 1872. Initially, adhesive revenue stamps were applied to indicate payment. From 1867 to 1872, many firms had their printers apply a government-approved design directly onto the certificate. The sample illustrated features a particularly sharp printing job. The price has gone from $35 to $130, in five years.

The fourth scan shows details of a three share certificate that was issued in 1872 by the Atlantic, Mississippi & Ohio Rail Road Company. The firm operated 428 miles of line in Virginia and Tennessee. The certificate is an uncanceled example signed by A, M & O President William Mahone, a former Confederate general and future Virginia senator. Five years ago, it cost $150. Now, it fetches about $275. The piece provides a good example of the effects that cancellation and issuance can have on price. A canceled version of the same certificate is only worth about two-thirds as much. An unissued version only goes for about one-quarter the price.

Condition and rarity can also be significant price factors. As with coins and currencies, stock certificates are now being graded and encapsulated in archival plastic. All else being equal, of course, higher grade items are worth more. Third party certificate grading is still uncommon though and investors usually have to rely on descriptions and pictures provided by dealers and auction sites. As always, it is best to deal with firms known to provide accurate condition information. As to rarity, just ask anyone who has paid close to $3000 for a hard-to-find Standard Oil certificate signed by J.D. Rockefeller. Uncommon items in good condition normally command a premium. They are not always the best investments, however. Consider the canceled Lake Shore and Michigan Southern Railway certificate in the final scan above. It features a pleasant design, intricate vignettes and an interesting orange revenue stamp. It's in excellent condition and only about eight are known to exist. Five years ago, it cost $200. Today, it's still worth about $200. Caveat emptor.

Larry Schutts has invested in high grade collectibles for over twenty years and recently opened an online Collectible Investment Store.