Moneyball: Value Investing in Baseball

Moneyball: Value Investing in Baseball

I really enjoy baseball. It’s a great game. No timers, no clocks. The winning team has to get the losing team out at least 27 times.

A great movie about baseball is Moneyball. This film was released in 2011 and it’s about a small market team, the Oakland Athletics, and how they are having trouble competing against large market teams (like the New York Yankees) who have larger budgets and are able to pay more money for the best players. The story focuses around the Oakland General Manager, Billy Beane (played by Brad Pitt), and his quest to find a way to recruit players to form a winning team even though they can’t afford to pay the higher salaries the top talent requires.

Beane finds Yale graduate Peter Brand (played by Jonah Hill) who uses a system for evaluating players based on math. It’s a more scientific approach to player evaluation. Using metrics like on base percentage rather than a traditional batting average and looking beyond things like unorthodox pitching style or age and focusing strictly on performance they are able to find value in players that other people overlook.

Moneyball is based on a true story and the metrics they use are based on the “Sabermetrics” pioneered by Bill James and others.

It’s essentially applying the concept of value investing to baseball. While Billy Beane and Peter Brand looked for undervalued players who would get on base, get runs, and help Oakland win baseball games, value investors look for undervalued stocks that will produce earnings, positive cashflow and make an investor money.

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