Investing & Maybe Fantasy Baseball

Last July I picked up an investing book about the stock market. I knew very little and was never interested in investing but for some reason unknown to me I decided to buy it. After reading it I started listening to the Rule 1 Podcast. I quickly got hooked and have now spent all my free time trying to be an investor.

What got me hooked was I saw so many parallels between fantasy baseball and investing. For example, at the draft every owner has more or less the same information available, but owners continue to make the same mistakes over and over again.

One example is over drafting rookie’s and/or players with small sample sizes. The poster children for this phenomenon are Vladimir Guerrero Jr. and Adalberto Mondesi. The both have NFBC average draft positions (ADP) in the late 30s/early 40s. Both of these players are going before Anthony Rendon, which says a lot considering he has been a very good fantasy producer for four of five seasons.

The Guerrero and Mondesi fantasy owners are taking that high because they believe in their potential, which is immense for both. Guerrero has been compared to, from a fantasy perspective, Miguel Cabrera. Mondesi could hit 25 home runs and steal 60 bases. If the season was played out one thousand times I think he puts those numbers.

However, what are the probabilities Mondesi actually does that in 2019? I think it’s less than 10-percent. That doesn’t mean his upside should not be considered, but I’m advocating fantasy owners to think in terms of probabilities and what the most likely outcome is for every baseball player.

Guerrero is an immense talent. Every scouting report I’ve read says he’s going to hit when he makes it to the Majors. With his current ADP fantasy owners are assuming he receives the Kris Bryant treatment where he wastes away in the Triple-A for 20 days before getting called up (from a management perspective I 100% advocate this.) It’s also possible Guerrero is in the minors longer. The Blue Jays GM has recently said, “I just don’t see him as a major league player.” He’s probably pandering but I think there’s at 25-30% chance he doesn’t come up until June or later.

Mondesi had a great 2018, but don’t forget the 190 at-bats he had in 2016-17. Can he repeat 2018’s numbers over a full season? Sure. However, I can also see him hitting .220 and batting ninth in the order. If Billy Hamilton has a hot start and Mondesi starts slow I can see Ned Yost hitting Hamilton first and Mondesi ninth. I think the ladder is much more likely than the former, but at Guerrero and Mondesi’s ADP fantasy owners are only focusing on the probabilities of excellent performance instead the probability of outcomes.

In investing and in fantasy baseball its more important evaluate the probability of an outcome versus the possibility of certain outcomes. If both were players taken in the 8th-9th rounds I wouldn’t have an issue because their upside makes them worth the risk, but at their current ADPs there is little to room for downside in their performances.

I wanted to discuss how one little adjustment to my projection system that has had a tremendous impact on my NFBC drafts.

In the past I would project players based on each player having a full season. For example, I would project Ryan Braun’s full season supposing he would play 150 games. That is a lot of games for Braun when you consider he hasn’t played in that many games since 2012.

The most likely scenario is he plays between 100-120 games. I currently project 550 at-bats. The odds of him reaching that is less than 20 percent, but it’s important for me to know what he will do when he’s healthy. If only projected 420 at-bats I will never draft him because he’ll be too far down in my projections because his numbers wil be compared to other players with projections for 530 at-bats.

This brings me to the main point. There a dozen or so hitters who won’t have jobs to begin the season but if an injury occurs that player will have fantasy relevance…most likely in slightly deeper formats.

For example, Michael A. Taylor. He’s currently the Nationals fourth outfielder. If Victor Robles, Adam Eaton and Juan Soto all stay healthy Taylor only gets 100-150 at-bats. However, Robles and Eaton are not bastions of health and either of them get hurt Taylor would be in-line for the majority of the playing time. Sure, Matt Adams will play every fourth day, but Taylor is the one who would benefit the most fantasy-wise. If Taylor played a full season I can see him hitting 10-15 home runs with 35 stolen bases. That would make him a borderline top-50 outfielder.

In the past I would project Taylor for 150 at-bats and I would never consider drafting him. Now, I project all hitters assuming they played every day. This process tells me which players I should draft at the end of the drafts because these players are lottery tickets. If I can draft a top 50-60 outfielder for the price of nothing I will gladly take that chance. Also, if you draft Eaton or Robles drafting Taylor gives you protection in the event either one gets hurt.

I used to be married to the players I drafted but I’ve learned that after the first month at least 5-7 players are no longer on my team so if I draft Taylor and after three weeks I want to pick up a pitcher I will do so. However, if I don’t need someone I will gladly hold my lottery ticket because you never know if the ticket is going to pay off.

Other names to look at (in no particular order):

• Matt Adams
• Hernan Perez
• Scott Kingery
• Jose Martinez
• Manuel Margot
• Franklin Barretto
• Alex Verdugo
• Ryan McMahon / Brendan Rogers
• Ian Happ
• Kyle Tucker
• Dustin Fowler
• Ryon Healey
• Willie Calhoun

I want to talk about value. Specifically, getting as much value as possible for every draft pick. Every fantasy owner knows this but so often this mentality is abandoned usually after the third round. I believe this occurs either because owners don’t know how to value players statistical output properly and/or they’re not paying attention to what statistics are on sale.

Fantasy baseball is all about accumulating statistics. Therefore, before the draft even begins every owner has to have statistical thresholds for every statistical category. Having thresholds are like the stars to the sea captain.

If you’re playing in a Roto format I recommend calculating the total statistics, you will need to finish third in every category. I recommend third because if you finish third in every category you should have enough points to win the league. Let’s look at a current example of owners not properly evaluating a player’s statistical output.

Joey Gallo has an average draft position (ADP) among hitters of 69 at NFBC. (If you want real ADP data always go to NFBC because every owner has spent a lot of money to play so you know everyone is trying their best.) I personally have him ranked 109. I’m projecting a .210 batting average with 40 home runs, 92 RBI, 83 runs and 3 stolen bases. You may think I’m pessimistic on Gallo, but let’s look at the projections on FanGraphs (below).

My projection is more bearish compared to the projection systems, but I’m in the ballpark (pun intended). You may be thinking my formula is not valuing home runs properly or my formula is trash. Let’s look at my top 25 hitters versus the top 25 hitters in ADP at NFBC below. (I used ADP data before Francisco Lindor’s injury.)

For the most part I’m sharing a brain with everyone. Of the 28 players listed my rankings are five or less draft spots away from everyone. You may be thinking I’m not valuing power properly but I’m higher on JD Martinez and more importantly, Khris Davis.

So why is there a 40-point difference in ADP for Gallo? It’s a combination of these three reasons: A) his owners are more bullish on his home run totals and think the batting average will improve, B) his owners want to lock in 40 home runs and C) Gallo provides elite output in the home run category.

I can understand the first reason but even if someone is projecting 45 home runs his ADP shouldn’t be that high. The other two reasons further represent why fantasy owners are losing value at his ADP. If Gallo is worth a 11^th round pick and someone drafts him in the 7^th round, then that person is overpaying for his statistical output. Suppose the 7^th round pick has a value of $20. If you take Gallo, whose only worth $15, at a slot that demands you get at least $20 of value you’re putting your team at a deficit. If you continue to overpay for players you’re going to have a mediocre team at best.

Sometimes it is beneficial to overpay, but you should do that for only one or two picks. If you’ve drafted speed-first players who offer no power (Billy Hamilton or Dee Gordon) it could be worth to overdraft Gallo because you will need his power to reach the necessary home run totals. However, I bet most owners are not employing that strategy.

Summary: rank all the players and compare your rankings with NFBC’s ADP. This will allow to find bargains and not overpay for players. At the end of the draft if you have got more value than anyone else you have a great chance of winning your league.