This issue comes up every few years: Someone is rummaging about in their attic or basement (or less romantically, a safety deposit box), and they find some long forgotten stock certificates.

I first noticed this as an issue with EMC more than a decade ago. A Massachussetts area man found a few certs that had appreciated somewhat:

The man, a 62-year-old salesman who wants to keep his identity under wraps, recently found that some stock he thought he had sold long ago had been quietly gaining value for 13 years. A week ago, it was worth about $4 million. The investor said he bought 3,000 shares of EMC, the data storage company, on a tip from his cousin in 1987, but soon sold 2,000 of them to pay for his children’s college tuition. He forgot about the remaining 1,000 until the state’s Abandoned Property Division, noticing the inactivity, contacted him last month.

Sure enough, after spending three days in his cellar with a kerosene lamp, he found the still-sealed envelope with the stock certificates. The shares, for which he paid about $15.75 each, have split several times, making him the owner of 48,000 shares whose latest 52-week high was $104.94.

-New York Times, December 03, 2000

I was reminded of that story this week when this one showed up in the Guardian:

Man buys $27 of bitcoin, forgets about them, finds they’re now worth $886k

Bought in 2009, currency’s rise in value saw small investment turn into enough to buy an apartment in a wealthy area of Oslo.The meteoric rise in bitcoin has meant that within the space of four years, one Norwegian man’s $27 investment turned into a forgotten $886,000 windfall.

Kristoffer Koch invested 150 kroner ($26.60) in 5,000 bitcoins in 2009, after discovering them during the course of writing a thesis on encryption. He promptly forgot about them until widespread media coverage of the anonymous, decentralised, peer-to-peer digital currency in April 2013 jogged his memory.

These sorts of stories typically are used to extol the virtues of Buy & Hold investing, or Set & Forget portfolios.

Why is this an example of Selection Bias?

I am reminded of the Steely Dan song “Throw Back the Little Ones (and Pan-Fry the Big Ones)”. This method of collecting samples uses outliers — the Big Ones — the wildest and most improbable investing success stories to demonstrate their point. What you do not see are all of the Little Ones, the higher probability, more common versions of the found stock certificate. That narrative usually goes something like “Did you ever here of a company called First Amalgamated Something or Other?” These stories lack the sexiness and Wow! factor of improbably finding a few million dollars in your basement.

Here are the headlines that you did not see — because no one shares this information, and due to the natural selection bias of them:

• Man Finds Worthless Lehman Brothers Stock Certificates in Attic;  “I thought I sold these,” he cried

• Man Inherits 10 million shares of now worthless GM Stock; Great Grandfather dies after 10 year coma “If only he went sooner

• Forgotten AIG shares Almost Worthless; Post Bailout and Reverse Split, boy finds $11 dollars worth of stock; “it was once worth millions” dad laments

Or most likely:
• Forgotten Penny Stock Certificates Still Worthless

I bet for each one of the found millions story, there are 100 worthless unpublished stock cert tales.

Steely Dan song after the jump . . .






Throw Back the Little Ones And Pan-Fry the Big Ones

Lost in the Barrio I walk like an Injun
So Carlo won’t suspect something’s wrong here
I dance in place
And paint my face
And act like I belong here

Throw back the little ones
And pan-fry the big ones
Use tact, poise and reason
And gently squeeze them

Hot licks and rhetoric
Don’t count much for nothing
Be glad if you can use what you borrow
So I pawn my crown
For a ride uptown
And buy it back tomorrow


Done like a matador I pray for the weekend
And hope the little girls still throw roses
Else I’ll change my bait
And move upstate
Before the season closes

Category: Cognitive Foibles, Financial Press, Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “Found Stock Certs: Spot the Selection Bias”

  1. constantnormal says:

    … man checks lottery ticket discovered in coat pocket, finds his ten-millionth loser …

  2. sailorman says:

    To your point, when my mother passed away, i found 10 shares of Kaiser industries worth about 0.

  3. Robert M says:

    Ritholtz and The WAPO, I believe have run posts on whether or not the gerrymandered districts are not responsible for polarization in the last week. They argued showing voting Data for the ’76 election vs the ’08. In 76 the house districts looks like you just sold vol. In’08 the curve looks more like you bought vol. The argument then was the electorate on its own became more extreme on its on.
    The conclusion is an example of selection bias because as a frat boy or sorority girl the tendency in the house is to roll w/ the alpha dogs. All of us have done it. If you mix the company, the extreme becomes buffered as it is perceived as safer to discuss/display your own thoughts. The solution is a more neutral, perhaps like the townships of Illinois as a House district as opposed to professional gerrymandering, district drawing.

  4. Jonathan says:

    That reminds me of a couple years ago when I found a old stock certificate of mine for 20,000 shares of Cinema Internet Networks. They aren’t even listed on exchanges anymore…

  5. Petey Wheatstraw says:

    In 2004, when my mom passed away, I found a life insurance policy from Metropolitan Life Insurance Company (now Metlife), that my grandmother had purchased on my mom for 10 cents, in 1932, when my mom was an infant.

    Long forgotten, it had automatically converted to stock when the corporate structure of Metropolitan Life Insurance Company was changed, sometime in the past.

    As it was part of her estate, I had to be liquidate it and divide the proceeds.

    It was worth close to $900.

    Seems that buy-and-hold often (and sometimes multi-generationally), becomes buy-and-forget.

  6. MidlifeNocrisis says:

    My Grandfather (now deceased) worked for Maytag in Newton, Iowa for 9 years as a draftsman, starting in the late 1920′s. He always liked the company although he later quit to farm full-time (farming was his first love).

    He accumulated Maytag stock his whole life and (fortunately for him) sold it all when he retired in the early 1990′s. So I guess for him the timing was right. Approximately 10 years later the stock was practically worthless.

  7. When my father died, we found he had a small share in an oil well — that came up dry. It was a thrilling 2 days.

    • cwilk3 says:

      Long ago I worked in the business section of a Public Library. Several times a year someone would come in with a newly “discovered” (or bought at a flea market, or found in grandmas shoe box, etc.) stock certificate and we’d go wading thru years and years of old Moody’s Manuals. As I recall after helping many people with this search only one certificate turned out to be worth anything (and only a couple of hundred at that). They were pretty to look at and it was fun to research but it was fantasy busting when you got the results.

  8. rashley314 says:

    A coworker of mine was a big buyer of Webvan way back when… I think his bathroom is wallpapered with those certificates.

  9. [...] A prime example of selection bias.  (Big Picture) [...]

  10. Joe says:

    So the neighbor asked for some help with her mom’s estate in 2005/6 We took a look and found about $300K which was nice… No jack pots, just savings and dept store shares from where she worked that were worth more 10-15 years after they bought. The one surprising thing was a small telecom stock that had been red hot in the late 90′s-2000. Not at all what you’d expect to find inna ol’ lady’s effects. It had been way up and then way down. It was at 80% of purchase price when we found them. I advised her to sell. She took the shares to her bank and asked her banker to cash them in. He told her that stocks were for the long run and she should be patient. So the shares could be found in her estate?

  11. slowkarma says:

    Or most likely:
    • Forgotten Penny Stock Certificates Still Worthless

    I wonder if there’s an investment strategy buried in this for, say, 20- and 30-year-olds? You look at penny stocks (because you can afford them) but make a serious study of them, and find, say, 25 stocks for less than a dime a share that you calculate have the best chance of long-term success, then put a hundred bucks into each one and forget about them…but not really. Stick them in a safe deposit box with a resolution not to look art them until retirement. What are the chances that just one of them would be worth at lot more than an inflation-adjusted $2500 by retirement? Wonder if there’s a study?

  12. Seaton says:

    Dad, with “others” at Bache & Co in the 1960′s, decided to buy “penny mining stocks” in Canada. (“Can’t Lose!” said one fellow as I sat on the odd stool watching the ticker near the ceiling behind his head.) Move forwards to the 1980′s, when Dad & Mom moved to Florida. He found the certificates and did a “sale” to his banker, for a dollar, all the worthless certificates. Banker sold them back to him a year later (I’m still unsure what that all meant) for a dollar. Typical certificates, companies gone bust for years, etc. Finally, in 2002, Dad dies, I have to find all assets as P.R. (accidental, fell out of pendaflex hanging file folders in desk drawer) Discover the envelope with the multi-folded-numerous times certificates, and the small-yellow-pad notes from him to banker, a nice avuncular man who died suddenly in 1990. So, they’re worthless. However, underneath the envelope was another envelope, of the “WWII” policy & nowadays MetLife life insurance policies he had (he only knew of one, his Father had bought a duplicate policy with his inheritance of $1,000–1930?–and Dad never knew the difference.) Those, as I processed them through the probate, turned out to be $65,000 worth of value for Mom. Loved your story, Barry, thought I’d share mine.