Right after the launch of the BrickPicker site, a very intelligent member (The BrickMeister...AKA Brad), mentioned we should use another type of analytical formula to track the appreciation of LEGO sets in our database. He was an experienced financial planner that dealt with the stock market on an everyday basis and thought the use of the CAGR percentage instead of the ROI (Return On Investment) percentage would be a better gauge of secondary market performance. The Compound Annual Growth Rate is a formula that is applied to an investment (in our case, a LEGO set) to help determine the investment's annual smoothed*** return (The term "smoothed" in finance and accounting circles means to remove "peaks and valleys" from data and results.)*. The final percentage that you get upon calculating the Compound Annual Growth Rate is a smoothed rate of return that shows the positive or negative growth of your investment over a specified period of time.
The CAGR can be used by LEGO investors and collectors to understand what an investment has historically yielded on a yearly basis. Obviously, this formula can't predict what the future yields of a particular investment (LEGO set) will be, but it can be used as a barometer to gauge the investment's future viability within the market. This number can also be used to calculate an investment's average growth rate over several years. On our site, we use it quite frequently to compare one LEGO set to another in terms of growth and appreciation. We also use the CAGR to compare one LEGO theme with another. Now, granted, this is not a perfect measurement, but it does give us a general idea of how a LEGO set or theme performs in comparison to other LEGO sets and themes.
The one thing that became surprisingly apparent to both Jeff and I was that the iconic STAR WARS LEGO theme, as a whole, was an underperformer CAGR wise. While there are many standout sets in the STAR WARS theme, such as the Ultimate Collector Series sets, the theme as a whole was always near the middle of the pack, sometimes even below average, when comparing one LEGO theme to another. Even the scoffed at CITY theme outperformed the STAR WARS theme on a regular basis. There can be many reasons why this is...too many remakes...too many sets...too little interest. Too little interest? Yes. There hasn't been a new STAR WARS movie since 2005, and those "prequels" met with mixed reviews and fan response, so it is quite possible that the lack of love the last three STAR WARS films (The Phantom Menace, Attack of the Clones and Revenge of the Sith) played a role in the lack of interest of the LEGO sets based on those films. So with these thoughts in mind, the 'Million Dollar Question' is…"Will the new STAR WARS movie, The Force Awakens, have an impact on the LEGO STAR WARS theme?" To answer that, let's take a look at the STAR WARS theme CAGR for the past five years...
As the reader can see, the STAR WARS theme started to "awaken" about the same time the new STAR WARS movie was announced and started production...in and around 2014. Prior to that, the STAR WARS theme was overall a poor performer in comparison to many other LEGO themes. Considering the "average" LEGO set across all the themes has an annual CAGR of around 12%, the STAR WARS theme was surprisingly below average. If you take a closer look at the theme though, you will realize there are a multitude of STAR WARS sets that appreciate very well. The problem lies within the popularity and vast amount of STAR WARS sets released through the years. Considering the STAR WARS theme makes up about 5% of all LEGO sets released since 1965, it takes a lot to move the so-called dial of the theme CAGR. That being said, the theme CAGR for the STAR WARS theme has doubled in the past year to over 12% and is now above average.
It is obvious that the new STAR WARS movie has had a profound effect on older and retired STAR WARS sets, and there is a renewed interest in a theme that was stagnant for years. Due to publishing limitations and time constraints, the data for this article was aggregated up until the end of August, so we haven't even hit the maximum STAR WARS buzz and hype as of yet. It is quite possible to see a huge explosion of growth in a vast majority of the Original Trilogy STAR WARS sets over the next six months. What's better yet, there is a new STAR WARS movie planned for release annually over the next three or four years, so the interest in the STAR WARS theme should remain strong. There is one caveat of note though...with these new movies being released annually, some of these new STAR WARS movies are "pre" or "retro." In other words, they go back into a time before The Force Awakens, and this could lead to possible remakes or reissues of some iconic sets like the 10179 Millennium Falcon or similar sets that have appreciated to stratospheric values. But that is a discussion for another day. Regardless, The Force Awakens and any new STAR WARS movies that follow should be a net positive for the LEGO STAR WARS theme and LEGO investing and collecting as a whole.
