It beats the heck out of any stock. I’m referring to one of those bonanzas – an item Andrew Murstein’s grandfather bought in 1937 for $10. Its current going price: $390,000.

No, it’s not a rare stamp or an ancient coin someone luckily bought years ago that has skyrocketed in value, but rather a New York City taxi medallion whose price has appreciated an average of 15% a year over the past 50 years, largely because of the limited number of medallions and the city’s mushrooming population.

At present, there are 12,187 taxi medallions, of which 1,187 were sold by the city in 1937 at $10 each. Another 400 were auctioned off in 1966 and 1967.

Mr. Murstein, president of Medallion Financial ($9.06), the city’s largest financier of taxi medallions, a public company that generated about $40 million in revenues last year and expects around $50 million this year, notes that the medallions – in terms of rising values – have been on a tear the past three years, rising 34.5% from $290,000 to their current $390,000 price tag. Spurring this rise, aside from the scarcity value, have been low interest rates and last May’s 26% jump in meter rates, which had been anticipated well in advance.

Last year was a premier year for medallion prices, which ballooned almost 22% from their 2003 close of $320,000.

Not every year, though, has been a winning year. Following September 11, 2001, medallion prices tumbled from their 2000 close of $250,000 to a 2001 wrap-up of $199,000, clearly demonstrating nothing goes up forever.

Mr. Murstein, who personally owns 300 city medallions at an average cost of $12,000, doesn’t buy that. “I think medallion prices will rise through any environment, which is precisely what they’ve done,” he noted, “in the face of 20% rates, an oil embargo, and wars.” Likewise, he points to a solid potential market for them, given a city population of 30,000 licensed cab drivers and an ease of entry into their own business by immigrants looking to realize the American dream. About 90% of new cab drivers are from India or Bangladesh.

Okay, let’s say you want to be a cabbie and buy a medallion. What are the economics? For starters, there are 20 licensed brokers regulated by the city that sell medallions. To buy one, Medallion Financial, for example, requires a 20% down payment (that’s $78,000) and charges you 6% interest per annum.

If the cost of a medallion is too rich for your blood, you can always get a taxi license and rent one for a 12-hour shift. The rental will run you $100 a day; gas, another $25. Figure an average $275 a day in fares and tips, deduct your costs and you can make about $150 a day.

What does it all mean to Medallion Financial? According to Mr. Murstein, a rising earnings trend. The company earned $0.11 a share in 2003, and he views as “reasonable” Wall Street estimates calling for per-share operating earnings of $0.28 in 2004 (yet to be reported), $0.40 this year, and $0.48 in 2006.

Meanwhile, for many New Yorkers, such as Emily Dolan, a coffee shop cashier, a cab ride is hardly a joyride. “Most cabbies drive like madmen,” she said. “They talk on the phone while driving, they eat when they drive, blast their radio, and some drive with a clipboard in one hand, a pen in the other, and barely speak English. The passenger seat in the front usually looks like a garbage disposal, and there seems to be a contest among drivers as to who can pass the most gas.”