After a lengthy delay due to Covid-19 and a worldwide pandemic, it appears Major League Baseball will finally start its season on July 23. During the pause there was some ugly labor negotiations between the MLB and the MLB players' association over prorated salaries and number of games, all giving off the negative image of millionaire players fighting with billionaire owners. It would be reasonable to discourage this kind of behavior by not following the sport anymore and shifting my attention to something more important than baseball, but the truth is I can't......baseball is just part of who I am, who I grew up with. It's a game of numbers, a game of strategy, a game of patience (lots of patience in those 0-0 games), a game of listening to announcers call the game over the radio, a game of hearing the crack of the bat, a game of summer, continuing on when no other major sports are being played, and it's also a game of fantasy baseball, a game I just can't really quit.
In the past few years I've been able to replace some of my enthusiasm for fantasy baseball with stock investing, as they both have the same idea of investing in something, putting one's faith in a stock or player and rooting for them to do well, and the better they do, the better I do. It's kind of like what drew me to Pokemon: collect different Pokemon, see them develop and win battles for you. There's a lot of different strategies in all these games, but there are 2 different schools of thought: 1.) buy low, sell high, and 2.) just go with the winners and stay with a winning horse. The first strategy is the basic tenet of investing, trying to find undervalued stocks and invest in them before they get really good. Easier said than done, as usually there's a reason a stock is down a lot: something fundamentally has shifted about the company, it's balance sheet is bad and it's taking on a lot of debt, it just cut its dividend, or just simply, investors don't like it and don't want to be in it anymore. Currently, those would be represented by the "re-open" stocks that are correlated directly with the opening of the economy: if the economy opens sooner rather than later, they will do well and get back to business. Disney (Disney World just opened this weekend), restaurants (McDonald's), airlines, travel, malls, retail business, are all examples of these: they have been beaten up badly since the pandemic hit, but there's a reasonable thesis that they good go shooting up if and when there's a vaccine that allows the economy to go to normal and the consumer to get back to what they do best, spending. Then there's the winners of the Covid-19 economy, coined the "Covid index" by Jim Cramer (genius founder of the acronym FAANG, which coincidentally are all doing well under the Covid-19 economy). These companies don't need the economy to reopen to do well, in fact they might be benefiting from it, especially Netflix and Amazon, who are growing more quickly than they would have normally due to people being at home. They've come up so much in the last 3 months, so there's a reasonable thesis that they'll dip down at some point or at least stop going up so fast, but sticking with the winners has worked for Amazon since it IPO'ed, going continuously up, up, up basically in the straight line the whole time. Can it ever stop? That's the question I ask myself every day even when it was at 2400 (new all-time high), then 2700, then 3000 (surely that's a psychological stopping point it won't break easily?) until Friday's closing at another all-time high of 3200. (WOW). Other Covid-19 stocks have even crazier moves like Zoom video, Peloton, Docusign, Tesla, the list goes on. Should I stick with those winners?
The same kind of divergence plagues me in fantasy baseball as well. A baseball player comes out of the gate very hot, performing really well with several strong weeks. Does that mean they've changed fundamentally as a player and can be trusted to be good players the rest of the season? Or will an ugly beast called regression (to the mean) rear its ugly head and make that player go back to being a pumpkin? In stock investing there are terms like "hitting a top" or "getting ahead of itself" or "way overbought" or "trading at a high valuation." I often try to buy low at the beginning of a new season (they struggled last year like Kris Bryant, but I believe they'll come back to to their career averages!) but then as the season is playing along I go with the hot hand, believing that baseball players get momentum and "find their groove"/find their swing and will keep going until it stops. It's all very tricky, but trying to find out the answer is what keeps me going, and being right some of the time is what gets me really excited. Investing in stocks and investing in baseball players definitely have some similarities, not least of which is the ability to lure me in and get me invested in their success. Also, it helps to have some money ($$$) on the line to keep me interested: one of the strongest motivators, for stocks it's inherent but for fantasy baseball it also comes with a tinge of bragging rights and championship trophies (since I don't "win" any other competitions in my ripe adult age, I settle on trying to win fantasy championships).
Fantasize on,
Robert Yan
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