Are You Ready for Some Football?
Cory is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
We are within a few days now of my favorite time of the year. The leaves begin to change, the barbeques are being lit up, and football is about to dominate the forefront of ESPN for the next 6 months. Around the country, men and women alike are preparing cheat sheets, player reports, strength of schedule matrices, and the like. As I was preparing for my own fantasy draft this week, I couldn’t help but notice the correlation between the principles used when drafting a fantasy football team, and choosing companies to invest in. Let’s see if there is anything we, as investors, can learn from ourselves, as football managers.
The Power Players
If you play in a quarterback-centric league, Aaron Rodgers will almost undoubtedly be the first off of the board; otherwise it will probably be Arian Foster, a top running back for the Houston Texans. Rodgers and Foster are the consensus 1 and 2 picks for most of the drafts out there. So we know who the power players are going to be, if you were to start a portfolio tomorrow, who would your consensus #1’s be? The first stock that comes to mind here is AAPL (NASDAQ: AAPL) which has seen nearly 66% growth year-to-date. There are only 3 other NASDAQ companies with a market cap of at least $20BB and higher 52 week percentage price change. Comcast (NASDAQ: CMCSA), ASML Holding, and Amgen, all had benchmark years on the NASDAQ. These are the big dogs so far in 2012. Of these four, as you might guess, Apple and Comcast have substantially higher volumes than Amgen and ASML. If you were opening a portfolio today, and could afford something with a price point as high as Apple, it could be a smart play to “ride the lightning.”
What do Ray Rice, A.J. Green, and Trent Richardson all have in common? They are all highly sought after fantasy picks, and they all play in the AFC North. All 4 teams in the AFC North ranked in the top 10 in defensive yards per game last year. Which means each of those players will play against top 10 defenses at least 6 times this season. You will notice that I quoted 4 NASDAQ stocks above, and that is all well and good, but what happens when something in the tech sector causes a hard hit to the NASDAQ? My portfolio gets pounded. I love tech stocks, but I have to include others in my portfolio. This is why I also currently own Chipotle (NYSE: CMG) and Zillow (NASDAQ: Z), to name a few. Chipotle has higher two year expected earnings growth than almost all of its competitors: Panera, YUM!, and Jack in the Box (owner of Qdoba). Zillow has made some smart moves over the past year, and has nearly doubled in price since its IPO at $20 last year.
The Value Plays
This is where the Fantasy Football Champion is usually crowned. Unless your top pick tears an ACL in week 3, you win your league with the mid-late round picks who produce big numbers that year. Last year, for me, it was Fred Jackson of Buffalo, until he broke a bone in his right leg in late November. Your “value play” may be a player (or stock) that not everybody fully understands yet. That was the case with Fred Jackson and it certainly is the case with Citrix Systems (NASDAQ: CTXS). A recent article released by Citrix, shows that the majority of Americans do not understand this up and coming technology. This company has been on my radar for some time now. Aside from the fact that cloud computing will undoubtedly make substantial headway in the workplace over the next 5 years, Citrix has performed strongly YTD (+16%). I also have my own anecdotal data here too: based on my previous job in IT consulting, their cloud computing products are in higher marketplace demand than any of their competitors’.
There you have it. There are so many pieces of data to look at when examining a company and it is almost impossible to digest all of them. The same goes for fantasy football. At the end of the day, we have to make smart decisions with our money and do our best to understand the fundamentals behind the data. By starting with these three principles, and properly diversifying your portfolio (and your team), there is no reason you can’t be hoisting the trophy at the end of the season.
Cory Jez has positions in Chipotle Mexican Grill and Zillow. The Motley Fool owns shares of Apple, Chipotle Mexican Grill, and Zillow. Motley Fool newsletter services recommend Apple, Chipotle Mexican Grill, and Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.