Here are three fun items related to the World Series and your investments.
The New York Yankees have spent $2 billion on their roster over the past decade, more than any other team, by far, with no World Series appearances to show for it. The players were the best—by stats. They were largely bought out from other teams (including our beloved Rockies) after proving it. They had the track record. The Yankees are, by far, the owners of the longest and most impressive series of World Series Championships. It would take six hands to hold all their Championship rings (27). But they are not getting it done.
If I were an investor, looking at placing my money with a company, I might look to a company just like the Yankees and say—this is it. The statistics on the individual players are second-to-none. The long-term track record of winning is better than all of the competition. I want to win, today, and these guys say all the right things, and make all the right moves. But the immutable rule, printed on the bottom of every regular review, in bold print on every prospectus, is more true: past performance has no bearing on future performance.
When reviewing some Yankees-like investments, we may see a sluggish slugger in a slump of his lifetime. Do we fire him? Morningstar, and the academics elsewhere, say we need to have patience.
So be careful, as you look into your portfolios, and wonder why this? Why that? You might have a player or two you don’t want to trade, even if the current slump is painful.
Point two: stock market returns and the winner of the World Series are fun to compare. Believe it or not, in years after the Yankees win, equities have done better. Perhaps Wall Street is happy. And that ridiculous statistic is no more or less ridiculous than many other baseball stats—and nothing to invest on. Especially since the Yankees are out.
Point three: pitchers matter. The two teams in this year’s World Series have two of the strongest bull pens in history. According to some measures, their starters are the best ever to play in a World Series. We love sluggers, home-run hitters, but often times defense wins. This has never been more true for investing than it is today; stick with your winners, double-down on the pitchers. And always focus on the next pitch.