Investing

Increase Your Number of Winning Trades, Increase Your Profits…

By Charles Sizemore  |  September 24, 2019

With the World Series set to start next month, I have baseball on my mind. So today, we’re going to glean investment insights from Ted Williams, arguably the best hitter in the history of the game.

But before I get into it, I wanted to let you know that starting today, you have the chance to gain access to my Peak Profits service. I bring this up because, like Ted Williams, Peak Profits sports a very solid average that’s garnered users a steady stream of profits that they can comfortably rely on.

Ted Williams Knows How to Hit a Ball

The Boston Red Sox leftfielder finished his 19-year professional career with a lifetime batting average of .344 and an on-base percentage of an incredible .482, and this despite taking time off in the prime of his career to fight in World War II and the Korean War.

He also won the Triple Crown, meaning he led the league in batting average, home runs and runs batted in… and he did it twice.

To put that in perspective, there’s only been 16 Triple Crown winners in the history of baseball, and two of those belong to Williams. To cap it off, Williams was also the last Major League Baseball player to bat .400 in a season.

It’s safe to say that Ted Williams knew a thing or two about hitting a baseball.

And he was generous enough to share some of his secrets in his 1986 book, The Science of Hitting, which I strongly recommend for any baseball fan with an appreciation for history.

Interestingly, we can apply a lot of his same insights to investing.

Williams Had  a Strategy

To start, both baseball and investing are “sports” in which it pays to study. Sure, Williams was probably born with better eyesight and better reflexes than you or me. But that’s not why he was the greatest hitter in history.

Williams was the best because he was willing the approach the game analytically; study his opponents and — perhaps most importantly — practice.

More than a half century before Billy Beane used statistical analysis to revive the struggling Oakland Athletics (as recounted in Michael Lewis’ book Moneyball), Williams might have been the first “quant” in professional sports.

Williams carved the strike zone into a matrix: seven baseball lengths wide and 11 tall. His “happy zone” — where he calculated he could hit .400 or better — was a tiny sliver of just three out of 77 cells. In the low outside corner of the strike zone — Williams’ weakest area — he calculated he’d be a .230 hitter at best.

The “happy zone” will vary from batter to batter, but Williams understood exactly where his was, and he wouldn’t swing if the pitch was outside of his zone.

The Science of Investing

Likewise, investors need to have the self-awareness to know when the market is favoring their specific trading style.

When it is, it makes sense to swing for the fences. And when it’s not, you don’t have to swing at all.

Williams was notoriously patient and disciplined at the plate, which is why his on-base percentage was so high.

He had control over his ego and his emotions and wouldn’t swing because the defense — or even the spectators — was taunting him. He finished his career behind only Babe Ruth in bases on balls (walks).

And in investing, it might be easier. You can watch pitches go by until you see one you like. As Warren Buffett famously said, there are no called strikes in investing.

While professional investors have enormous career pressure to look like they’re “doing something,” individual investors don’t have to worry about a boss firing them. They can afford to be patient and wait for a perfect trading setup.

Williams, an eventual Hall of Famer, was chastised in his day for talking too many walks by none other than the legendary Ty Cobb. Well, frankly, Williams could call “scoreboard” on Cobb.

Cobb finished his career with a slightly higher batting average (.366 versus .344) but his on-base percentage trailed Williams’ by a much wider margin (.482 versus .433).

But perhaps the best lesson from Williams is this:

If there is such a thing as a science in sport, hitting a baseball is it. As with any science, there are fundamentals, certain tenets of hitting every good batter or batting coach could tell you. But it is not an exact science.

While it pays to take a detached, scientific approach to investing, it is absolutely not an exact science. This is why all successful investors diversify and have proper risk management in place.

This brings me back to my trading service Peak Profits.

Upping Your Win-Rate Average

In Peak Profits, I don’t swing at every pitch. I limit my portfolio to the 10 stocks that my trading algorithm ranks the highest based on my carefully selected value, momentum and quality criteria. And I’m not averse to taking a base on balls. If the system tells me not to swing, I don’t. When the system goes into hedge mode, I convert the portfolio into a balanced long/short portfolio.

Like Williams, I’m not necessarily looking to hit a homerun every time I step up to the plate. I’m just looking to get on base. But over time, the system has proven itself by knocking quite a few balls out of the park.

To find out more, click here.

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Charles Sizemore

Income and Retirement Strategist, Charles Sizemore, CFA specializes on dividend-focused portfolios and building alternative allocations by finding value opportunities outside of the mainstream stock market.

Charles is the executive editor and portfolio manager for Dent Research's premium newsletters, Peak Income and Peak Profits.

He is also a frequent guest on CNBC, Bloomberg TV, Fox Business News and Straight Talk Money Radio, and has been quoted in Barron’s Magazine, The Wall Street Journal, and The Washington Post. He is a frequent contributor to Forbes, GuruFocus, MarketWatch and InvestorPlace.com.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar. MORE FROM AUTHOR