This is an interesting and rewarding long read from an investment advisory firm in Houston. The article uses the stats & the history of professional basketball in the US to draw analogies for stockmarket investing. The article appeals to us for the implications it has for our style of investing in well known, widely held and, dare we say it, boring long-term compounders which also pay a decent dividend. The authors explain that – in the American context – such stocks make you extremely wealthy in the long run. They also highlight that most American millionaires who hold such stocks live modest lives in unflashy homes with unflashy cars. [The flashier millionaires presumably give their money to hedge funds.]
The star of the article is “George Mikan was the very first superstar of the NBA. He was the key to the league even surviving before it could thrive. Making him one of the most underappreciated athletes of all-time. Maybe because he was not athletic at all. His go-to move can best explain how to shoot a high percentage in the Stock Market as well, always has, but it has become equally under-utilized.”
So what was the secret to George Mikan’s success? “George tweaked one of Meyer’s drills and developed his own simple routine. He took the ball directly under the basket and with one step learned how to lay it in with his right hand, jumping off his left foot. Catch it from the net with both hands. Then, one step to lay it in with the left hand, jumping off the right foot. Over and over, both the hands and feet learning the basic recipes for scoring anywhere close to the basket from any angle. George made three hundred of these 2-foot baskets per session. The Mikan Drill was born.”
Inspite of the simplicity and effectiveness of Mikan’s idea, very few players today use it. Why? “Go into any gym and you will see the exact opposite being practiced today, thanks to the analytics boom from the NBA. You will see high schoolers wide open, with the ball in their hands in front of the rim unguarded, exactly where the Mikan drill begins. Only now, he is instructed to lean around under the backboard and rifle a one-handed pass 23-feet to the corner so the shooter can take one step…into a 3-pointer instead…No longer were players looking for good open shots, or even their favorite shots, as the first century of basketball instincts had taught them. Now, they were pre-programmed for what the computers said were the most efficient shots. Kevin O’Connor wrote, “An LED board wraps around the Rockets locker room, above each player’s stall. But it doesn’t flash motivational quotes from Vince Lombardi or Jack Ramsay; it shows stats: offensive rating, defensive rating, effective field goal percentage, and quality-shot percentage. You get the feeling you’re in a mad scientist’s lab — a stat geek’s man cave, not a sweaty locker room for alpha males.”
The mad scientists wanted as many 3’s as possible now and the most precious element isolated in that lab is called the “short corner.” You see, in the far corner of the 3-point arc, by the baseline, it is exactly one foot closer to the rim. Untold billions of dollars began chasing that one foot when you add up all the contracts being given to 3-point specialists, staffs organizing offenses around them, and the technology departments being built from scratch to analyze this data….”
This obviously has striking parallel with quant investing in the stockmarket: “All that money and time and effort to find that one foot of difference sounds familiar in the Stock Market. It is no accident that some of the best quants on Wall Street are now leading sports franchises. Indexing with ETF’s have revolutionized their game as well. Unquestionably more efficient systems have taken over each sport.”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
