The Splinter’s Zone
A lot has been made recently on the death of value investing. Blog posts, twitter posts. Even Warren Buffett has invested in AMZN. Cats and Dogs might as well be sleeping together.
But who cares? The Blues finally won the Stanley Cup (from last place in January to the Cup in June; not too shabby St. Louis) and baseball season can officially “start.” It is time for lazy summer days, BBQ, and baseball.
To love baseball you can’t watch just one game, you have to watch a season. And if you’ve been watching lately, the game has changed. There are “opener” pitchers, massive shifts, and swing path studies; just to name a few of the changes driven by statistics and data. Baseball, as it was, is dead. Thank you, Billy Beane, Bill James… and, my favorite, Ted Williams.
The Splendid Splinter studied the game like no other during his time. Look at this famous picture of his strike zone (below). Ted collected these statistics himself. Every pitch. He spent years asking veterans their tricks and incorporated every advantage he could into his batting. And it paid off in spades, he batted .400 or greater in 3 seasons.
Consider this, Ted batted .406 in 1941. He had started collecting and studying his own statistics and those around him for almost a decade before that. He was a data scientist before data had even been “invented”... Claude Shannon’s “A Mathematical Theory of Communication” wasn’t published until 1948. Maybe Claude was inspired by Ted.
Ted had a process. Ted leaned on every piece of information he had to gain an edge. He knew his strike zone, maximized it, and trusted his process. Even when teams shifted to right field, he swung his way.
The studious investor should take note. It’s important to know your strike zone. What is inside and outside your circle of competence? Warren Buffett beats this drum, and he learned it from Ted.
Value investing has had a tough go. Here’s a backtest of doing a Greenblatt screen (a proxy for value investing) for the last few years. For the minuscule payoff, it would have been easier to just buy SPY. We can debate the “why” (cheap money, the Fed, the constant spread of robots displacing jobs) and we can debate if we’re at the top of a cycle or not, but we’ll only know these answers in hindsight.
So what can we control now? Every investor has their zone. Find yours. Whatever you do best, refine that and build your process. Analyze, learn, grow. Buffett seems to be doing that (he bought AMZN!) at 88 years of age; old dogs can sleep with new cats.
The goal should be to invest intelligently and maximize your long-term returns, not to be a slave to any single style.
Swing for the fences!