It’s interesting to discuss what’s happening but I always like to drag things back to firm actions we can take. There is a great question from a member which kicks off this topic nicely:

Question: The bounce back seems to be most positive in strong PB premiums,  and other recent PB winners. Is it worth taking the opportunity to get rid of more speculative holds who may come good once or twice a season to focus on the stronger PB players? 

FIT:

Yes. Also no. This might take a while.

So recently, with whatever funds are available in recent weeks and months, I’ve been pretty clear that I think focusing on exactly these premiums and well known “core” types of players is the way to go. 

This is because they were always the most likely to be first in line for a bounce back when and if that came. And it’s happened.

Ideally then, we’ll have a few of these already. Hopefully more than a few. If we look at percentage rises since Saturday you’ll find a good deal of them are the sort of Core key strategy player I’d normally go for or discuss positively in Scouting. 

That’s true as a general rule – but if you flip the list around you can also see some good players getting pounded on. Trincao for example. Are people high? He’s doing very well for a new player at Barcelona. Boga – same. Paulinho – closer to a return than ever. Chiesa – looking good. Brahim Diaz – looking good. Falling anyway. 

What these have in common is that they are good but they haven’t proven it in an obvious way anytime recently. And until that player gets on the pitch and then does something so obviously good it slaps traders around the face… people will remain ignorant. Not everyone has access to the same level of research.

That can lead people into: “oh gosh, this player hasn’t done anything for a while… better sell to chase this riser!”.

This is a common action of the bad trader. Something to be avoided.

He’s a) ignorant that he’s already holding a good player and b) selling that good player low to buy another player who has already risen. As a general strategy this is all kinds of bad.

If I am right that Trincao is looking good for example and he starts in a few hours time vs Kiev and blows it away he’ll probably rise very fast exactly because he is starting cheap. So it’s on me to be right about that – I’ll go with my judgement rather than making any decision based on what other people are doing.

And if the facts change and he starts looking poor in the next few games I’ll have to deal with that and possibly take my loss on the chin. But it’s better to lose because I’m wrong or because a fact changed than because I followed someone else blindly.

So. Ideally we already have some of the rising players and are chasing it all too hard. 

But of course we will want more of them – so it comes down to the difficult question of when to sell.

Selling

We will obviously have some players we want to sell. But the typical problem we will have is that we will want to sell players nobody wants. The out of favour players.

I recommend going through your portfolio and flagging up all the players you want rid of, without thinking too hard.

Then go through each. Look at their recent performances maybe with the help of Scouting. Look at the current price. Look at any other soft factors like future transfers on the horizon. 

Often, if we have reasonably good selection criteria, we’ll see that we did buy them for a reason – even if they are out of favour now. Will that reason come around again? Eriksen I mentioned in scouting as a classic example. It’s utterly grim for him right now and traders would rather pick up toxic waste with their bare hands than put him in their portfolio.

But will that stay true forever? Probably not. By January he could be at a big EPL club or Dortmund. He’s 28 and in his prime, will find no shortage of suitors. And he happens to be a very high potential FI player. 

There are credible reasons why that apparent piece of toxic waste could be a £2.50 player by mid January. There is no way I’d be selling that for 74p. 

Obviously, if you could have cut this off much earlier in mid 2020 that was the best thing but that was hard to do because a) he showed us a bit of ankle with good performance numbers at times and b) you often couldn’t sell even if you wanted to this year. 

We have to deal with things as they stand today. So think about whether you really need to drop that player, or whether they are just currently unpopular. Often, there will be some credible reason they can turn it around.

Sometimes there will not be though. And where you can’t find a good reason – the best thing will generally be to take that hit even if it’s painful. If you’ve genuinely lost confidence and you’ve puzzled it for too long and still can’t think of a credible reason they are bouncing back anytime in the next few months? It’s time to move on. Be decisive here and take the hit in my view.

We may take a very low bid here – but it’s also possible to get a very low bid matched for a player we want when we recycle that money. 

It’s better to have a portfolio we are happy with and don’t want to be endlessly holding dead end players for a recovery that’s never likely to happen. 

True Value and True Believers

If we can free up money, we’ll probably want to spend it. If we have earmarked it for use in FI and are content with that principle – it is a time to have our money out on the pitch working for us, not sat in balances in my view.

If I can emphasise one thing for operating successfully in this kind of market with rapid rises it is this: 

Do not stray too far from a reasonable assessment of a players True Value.

We need to be making the decisions for ourselves about who is the best value. Chasing the rising players is a behaviour common to bad traders. Lots of people will encourage us to follow some very specific picks. They probably own these players. Forget them. They may be manipulators. Or at best, well meaning bad traders.

There is an acceptable strategy here where you take advantage of these bad traders and it is legitimate behaviour in a free market. 

But the really good traders are able to do this because they already own that player. They aren’t following. This is why for example in this downturn I’ve been warmer in my advice for a player like Sancho, Mbappé… even dare I say it Haaland.

These picks might be overhyped and running serious risks based on assumed transfers… but none of those risks should materialise anytime soon. So whilst they were down, you have a window there where you can pick them up. 

But if they return to anything like the previous high whilst the big risks are on the table – good traders are cashing that out all day long.

Two types of mentality here: 

“I own Haaland – he’s going to be the best striker in the EPL for the next decade! I’m holding no matter what because I’m really confident in my ten year plan for him!” 

Versus:

“I know other traders think Haaland will be the best striker in the EPL for the next decade. And I’m going to exploit that predictable behaviour heading into the transfer window and bank a profit to recycle into another player”. 

In terms of trading competence – this is night and day. Over 10-20 trades the trader with that second mentality is winning when it comes to overall returns every single season I damn near guarantee it. 

Never be the true believer in the first mentality type – the trader who thinks he has 10+ years of career dividends mapped out. I must have spent not far off 10,000 hours over 3 years assessing player ability and values and I will confidently say that predicting a players fortunes beyond 3 years would just be a comforting lie to tell yourself.

Ask me how a player might do this season or next and I can give you a fair idea within a reasonable margin of error. Beyond that? So much could change in terms of tactics, position, team, coach… it would be a pointless exercise. 

You can have some kind of 1-3 year plan in mind but the reason I monitor things each and every week is that you have to respond to new information all the time. 

In any case, I see little value in this strategy of exploiting predictable rises in predictable players after there has already been a significant rise. If they’ve risen already you are then at the mercy of the traders who were in first – they may dump on you. 

It’s also possible that enough followers come in that you continue to make a profit. This is fine… but the art of this is knowing when not to push it too far. Think of last January where buying Sancho at £7 for exactly these reasons could be a good idea as discussed in Scouting. But I knew not to be greedy and sold at £12-13 rather than pushing it too hard into the transfer window. 

I missed the £15 high sure – but I dodged all of the risk of the transfer collapsing. And was the profit I took at £12 sat there doing nothing for 3 months? Of course not. It will have been busy, making a loss with the rest of the market in this miserable year :). But probably not quite as bad as £15 to £5!

A similar tactic should work now if we can be disciplined on this. Of course, maybe next time the transfer does really happen – but it doesn’t matter. What is one of the key lessons we have learned in Scouting so many times this season already? New players with big price tags at big clubs struggle more often than not under the pressure of delivering immediately. 

So, if the player has already risen sharply way beyond a rational true value (see the Dashboard) OR way above other players of similar trend fit and quality just find something else. 

One problem we absolutely do not have right now is a shortage of high quality value players to go at.

Back to the Question

I got mildly sidetracked there so back to the original question: should we sell the speculative holds who may win once or twice a season in favour of the recent winners/stronger core players?

As above, I would hope we had a good number of these winners/core players already. That’s been an important thing to prepare for. Chasing it after the fact isn’t ideal.

However there will be plenty of these players left untapped. The market is full of strong players that most people just don’t know about yet – so those are potential targets.

With new money I would absolutely still be targetting the Core type that are really easy to sell. Someone like Gnabry for example was always bouncing from £2.50 if the market recovered. 

As he has risen already I may now go for a Coutinho or a Guerreiro or a Thiago… Bamba, Mason Mount is creeping in as per Scouting today. Moussa Diaby. Lukaku. Sabitzer. Kramaric. Curtis Jones. I could list dozens and you will find so many in scouting recently. 

These are all fairly easy sells if they perform. Not too obscure because we don’t need to be, yet. We will – if the market rises for a few weeks the obvious value may get eaten up. But there is currently no need to try too hard.

Give it a few weeks though and we may have to be winkling out more bargains or making fancy Key Strategy trend shifts. But right now simple is best.

Let’s say we have a player as you describe – someone who is good but may only come through 1-3 times a season at the moment. Hudson-Odoi maybe. Weston McKennie. Demirbay. Politano. 

It’s obviously tempting to drop them to chase the risers but this is tricky. 

There is a reason you are frustrated with them – and others will feel the same most likely. So you are going to be selling a player who you bought for a reason who may well turn up next week with a big score at a rock bottom price.

And if they do win – they can win big – because the price is rock bottom and if they do perform it will be “news”. One win for them at something like 40p to £1? That can be a massive dividend and maybe even a doubling of the price. 

An expensive well known player may have to win 5-6 times to acheive that same result, which is worth thinking about.

So I’d be careful here. Are they a bad player really, or are they just unfashionable right now?

We may just be selling a good player too cheaply. The cheaper they are the less they have to win afterall. One win a year can be perfectly acceptable in a cheaper player, especially if they have other longer range prospects like a transfer too.

I’d also say let’s not overreact to what we’ve seen in just a few days. We’ve literally just seen how fast prices can move. Those benefiting this weekend will not be the exact same names benefiting in a few days or a week.

This is how the recovery will go if it continues. The premiums and obvious value gets eaten up. Then, when that starts to look a little pricey… that’s when people will branch out and start casting their net a little wider.

So if you hold good players in that sort of area of the market… it may be best just to wait for people to come to you rather than sell them very cheaply. Provided of course they have credible reason why they can come back into fashion.