We are about two third’s of the way through the site Key Strategy for the Summer which takes us into early Season.
I’m going to do a quick review of how it is gone so far, then get straight into discussing how we handle what is a tricky week coming up and then outline what we will need to be doing in July (as mentioned in the latest State of the Market entry).
Quick Story So Far
Gradually exiting hyped transfer/media selections remaining from the successful End of Season strategy throughout May was the first order of business for the new strategy. I think it was the right call.
If you go and look at the highs of most of the players who were being hyped up for transfers at that time, May was exactly the time you wanted to sell. (Felix, Fernandes, Havertz, Pepe, Jovic, Fekir, Werner etc).
Many of them dropped in price, some of the best ones have flat lined since then. Very few have climbed further.
That freed up cash at the right time to move towards performance early.
In May many players with strong performance expectations for next season were reaching their low and it was the ideal time to pick them up.
They went on to start rising significantly throughout June, which should have rewarded those with portfolios resembling the site strategy portfolio balance:
I will do a full review of the strategy later, but I think it is progressing well so far. Some may find it interesting to go back now and look at the original again!
However, we aren’t even close to the end of this strategy yet, it will likely last until mid-August and as per the original article, I expect the majority of profits to come in July/early August. All we have so far is a nice early price bump and we are nowhere near declaring victory.
We have a tricky week ahead to navigate and I have lots of Scouting to do throughout July.
The Week Ahead
Two weeks ago on State of the Market I changed my outlook from Amber (caution) to Green (Optimistic).
We did have a great last two weeks on the market as expected. There is a general sense of optimism for the new season driving this but what is really lighting a fire under it is the bonus period coming to an end. Traders have to get their money out of the balance and into players before the end of the month if they want their bonus.
Today, I have changed my Outlook back to Amber/Caution because I expect a choppy week and we have to be on our toes.
It’s reasonable to expect a surge for the remainder of this week followed by a drop back for some players in early July.
End of the Bonus Period
This weeks’ job is to anticipate which players in our portfolio are most likely to drop. And which will hold their value and go on to increase further in July. That’s not easy.
Fortunately, the selection criteria in site strategy was designed to set us up for success ahead of the new season. If your portfolio mostly matches the Cornerstone 2 Selection Criteria you may already be largely in the right place. As a recap on those:
Essential: Performance suitability (as per site ratings/scouting), match for trends on age/playing position (see site Trends), Price (See Guide Pricing).
Desirable: Champions/Europa League, Likely Euro 2020 involvement, Transfer speculation (this is becoming less important but can still apply).
So, if we are mainly holding well known strong players who meet this criteria we are in a decent position (having picked them up at value, and likely seen them rise in the last month).
Because these players are usually quite well known and will enter the season with genuine optimism behind them they will likely stand up to any market jitters better than most hype/unrealistic speculation picks.
However, no player is immune because as I often say price is everything. If a player is quality but has spiked hugely in value in the last half of June (particularly if it is in the few days before the end of the bonus period) then that is a warning sign for me.
It is quite difficult though because a lot of players meeting the site strategy criteria have been rising a lot over the last month. That is where site guide prices come in. If players are significantly above on trend site guide prices for no obvious reason then that is a reason to be worried.
If in doubt, any player who looks pumped full of bonus cash probably is and if the price is worrying you that is likely your instinct telling you to lock in a profit.
I recommend going through your portfolio with a simple common sense check list. Do they match the site selection criteria? Do they exceed site guide prices? If so, is there a good reason for that?
If you are worried that a particular player is either a weak fit for the criteria or now over priced, you might want to move them on before the end of the month.
What to do in July
So, with a bit of risk management at the end of June (I’m not expecting to do too much, think portfolio surgery not portfolio bonfire!) we should enter July with a solid portfolio of players who carry strong next season optimism.
Many should continue their price surge from June at least until the end of the month. Some of them may fall back a bit in early July, but if we cut off the highest risk ones and hold the ones we think other traders will want for the season start we should avoid the worst of this.
I expect an early July jitter, but I think traders will shake that off quite quickly and optimism for the new season will push the market on again.
As outlined in the original strategy, July and early August was always the period I expected the site strategy to really pay off and I still think that will be the case even though a bit of it has come early.
As we get into July and I can see teams shape up in pre-season, the focus will be on refining portfolios.
Right now, having a portfolio full of players who are well thought of and performed well last season is exactly where we want to be. That’s what people are buying and they will likely continue to do so throughout July.
But in reality many of them will flop in early season. A positional change etc can kill a performance player quite easily. And winning performance is hard even for good players. When a decent performance player doesn’t win for a few matches (a totally unreasonable expectation) they will probably start to drop off if they are too highly priced.
Equally, many players who under performed last year will significantly improve. And we will have new players coming through as well.
In early season, as opposed to end of season and Summer, the site Scouting becomes especially important. In early to mid season it is dividend wins that drive prices and turn nobodies into superstars, not just hype or a vague trend fit.
So throughout July and early season, I’ll be working hard in Scouting to help us sell the highly priced players who look set to decline and load up on players who are good value and should improve.
Final Thoughts
We’ve already seen good results from the Strategy, and provided we manage risk sensibly and use pre-season Scouting to refine our portfolios, I think it will continue to deliver through July and into the start of the season.
It’s worth a quick note that players matching the above site strategy criteria are not the only ones of interest, although they do make up the bulk of my portfolio right now.
As covered under Scouting and Market Opportunities I think there has been/still is good opportunities in other areas like IPD players. Many of these can be older or otherwise off trend but can represent excellent value.
And, we also have media still very much in play. Cornerstone 3 of the strategy where we stayed on the look out for strong media targets has not really reaped a huge amount of reward so far. There has not been many dominant news stories yet.
Pogba and Hazard were the exceptions but they are not favourable trades since traders do not like stars leaving the EPL.
We shouldn’t totally switch off from this though. The last Key Strategy in practice article outlined some opportunities in this area and it can be worth a look at that now. Neymar is an example of a blockbuster trade that could reap rewards (although carries a few risks, see the latest public article).
There will also be some genuinely good transfers to come and whilst we all probably have transfer fatigue having been talking about it since February (!) we aren’t even into the business end of the window yet.
Transfers will still play a big part in price movements heading into August. We still have over a month to come of off again on again transfers, blockbuster moves, and expected moves falling through and causing a crash.
All of that can create opportunities and whilst site strategy during July is almost full square into performance (for good reason) I do have 10% in reserve in the balance to be flexible with.
That could be something like Neymar as a blockbuster transfer, or it could mean buying up a quality player who dives in price because of a collapsing transfer.
I expect this strategy to see us through until early August, and I expect to publish a new one before then.
Unless something dramatic changes, I expect the focus of the next strategy to be heavily based on my Scouting and performance analysis. It’s more about pinpointing the specific talented players rather than a full scale trend shift as per the two strategies before it.
Plus, the optional “Euro 2020 involvement” criteria I put into this strategy will become more important as we head towards November/December, which is why I made sure we got a jump on that early.
If you have any questions about the strategy at this point, hit the Contact FIT button at the bottom of the members home page and I’m more than happy to help.