I love baseball.  I am absolutely in my glory in October with the baseball playoffs going on.  Baseball jargon also works its way into our daily conversations and how we describe everyday occurrences.  If someone did an amazing presentation at work, they could say “He knocked it out of the park with that one.”  Baseball is also used to describe someone’s dating performance.  “He didn’t get to first base with her” or “He struck out with her”. It’s also used as metaphor to do your best and give it your best shot with the phrase, “If you’re going to go down, go down swinging.” But I also use a lot of baseball terminologies to describe my investing philosophy with twopercentgoal.com.  Allow me to explain.

First and foremost, I don’t try to hit home runs with my stock picks.  If you take care of the singles and doubles, the home runs will take care of themselves.  That is like the investing wisdom, “You take care of the nickels and dimes, and the dollars will take care of itself” It’s the same mindset.

I love the notion of small ball.  Cut down on your strike outs; put the ball in play; take what they’ll give you are all phrases that I take to heart in both baseball and investing.  Strike outs will happen and so will loses with your picks but keep both to a minimum.  Put the ball in play.  Yes, you may ground out, but you might also get a “seeing eye single”.  Make things happen. The same is true with your stock picks.  You might manufacture a win, but it is a win, nonetheless.  Take what they’ll give you.  A dead pull hitter loves a fastball on the inside half of the plate.  He can rotate his hips and pull the ball for a home run.  Pitchers know this so they’ll throw breaking balls low and away.  A good hitter will adjust and go with it taking the ball to the opposite field for a double down the line.  The same holds true for the markets.  Take what the market will give you.  If the market is peaking or softening, consider going short.  Don’t force it.  Let it come to you and adjust accordingly.

Baseball is a game of averages and so is stock picking.  Play for a higher batting average getting singles and doubles as opposed to a slugger who gets all the glory with his homers, but he strikes out far too much.  Ted Williams was the last man to hit .400 and that happened over 80 years ago.  Since then, someone hit more than 60 home runs eight times (although six of those were chemically enhanced).  The higher average is a rarer feat, but it is a winning strategy.

Billy Beane, the general manager of the Oakland A’s in the early 2000s, took one of the lowest payrolls and got his team to the playoffs without huge stars. He found value in each player.   Stock picking can be the same way.  Don’t play for the home run.  Play for the higher averages.  Enjoy the baseball playoffs and enjoy your overall performance.

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While the test data is overwhelmingly positive, there are risks with this type of investing and the author accepts no responsibility for any possible losses.

Cheers,

Al