Invest Like The New England Patriots

I am by no means a New England Patriots fan but I have to admit that the decisions that they make as an organization are incredibly shrewd. They had the wisdom to draft Tom Brady with a 6th round pick. They were smart enough to hire a coach that nobody else wanted who has only won 3 Super Bowls. The Patriots are smart enough to trade away high priced talent for numerous high draft picks that they stockpile. You can do the same thing with your investment portfolio. Here are a few things that you can do to start investing like the New England Patriots.

New England Patriots stock investing

Look for value

Some of the Patriots best players have been low draft picks that no one wanted. These are players that have high upside potential but need a little bit of time to develop. That is exactly the type of stock that you, me, and Warren Buffett should be looking for. Find value stocks. Those are the companies that are trading at a price below their true value. These are companies that have been discarded for flashier companies that look a lot better on the outside. Invest in these value stocks with strong fundamentals that have the potential to be stars in a few years.

Go against the common wisdom

In every draft the Patriots seem to go against the common wisdom of “NFL experts”. Mel Kiper, Jon Gruden, and Chris Berman will suggest needs that the Patriots need to fill and the team does not draft players to fill that particular need. Instead they take the best player available. You should do the same thing. Just because your portfolio is lacking a technology stock or an oil stock does not mean that you should go out and buy one at any price. If you find a retail stock that is a remarkable value stock, you should pick that up instead. Always buy the best values.

Always sell high

The Patriots have a knack for being able to cut ties with a player right before the player’s skills are eroding. They parted ways with Randy Moss, Lawyer Milloy, and Drew Bledsoe at the right time. By selling high, they got the maximum value for their investment. Your portfolio is no different. How many investors wished that they had sold Yahoo and Cisco when those stocks were in the triple digits during the tech boom? It is best to sell a stock when it is severely overvalued. I would rather lose $10 to $20 of upside potential versus holding a stock and seeing it plummet $100 or more.

Stick to your plan

One of the ways that the Patriots differentiate themselves from other teams is that they pick players that fit perfectly with their system. That way a player can be plugged in seamlessly and helps to improve the function of the overall team. You can do the same thing by sticking to a formula that works for you. If you are a long term investor, then you should not be taking the same approach as a daytrader. You should look for value and ignore short term movements. If you are a trader, your focus should be on momentum investing and not fundamentals. If you find that you have a strategy that works keep using it. If your strategy is a loser, dump it and start over.

Are there are any points that you think that I have left out? Do you have any to add?

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6 Responses to “Invest Like The New England Patriots”

  1. avatar optionsdude says:

    Absolutely wonderful advice. Reminds of the Oakland A’s and the way that they approached baseball. Michael Lewis wrote Moneyball about their system of using on-base percentage and slugging percentage to help determine “value” in a player. It is all about productivity and not about star status. It would make sense the Patriots would follow a similar value approach with a businessman owner.

    I am hoping that I am selling high by locking in a few option contracts on ONXX. It spiked to $42 per share so I bought some puts to lock in the profit at that level. If it keeps rising, great. But if not, I am OK with that too.

    • avatar Mark says:

      Moneyball was a great system. Billy Beane used it for years. How did the May options contracts work out for you?

      • avatar optionsdude says:

        Well, the May expiration has 2 more weeks to go so the contracts are still in play. With ONXX, I purchased June 42 puts when ONXX was trading right around 42. I am trying to work my way out of a few mistakes with ONXX and have been playing around more for experience than profit. However, my current basis in ONXX is at 40.87. That includes some June 40 calls and May 34 calls that I will have to buy back and roll out. It is nice knowing that even if ONXX declines from the big spike of 10% on Friday that I can make some profit from it. If ONXX rises above that level in the next two weeks, I will sell a few calls to provide the cash for purchasing back those that are outstanding in order to complete the roll. I can also sell ONXX outright which I did 100 shares at 40 on Friday.

  2. Good post. FYI, Brady was a 6th rounder, not a 5th rounder

  3. avatar Kolton @FMT says:

    I absolutely love this article! The New England Patriots are a unique team (even though I am not a fan, either) and they definitely stock pile draft picks in order to be able to pick the best available athlete. But I also believe that a strategy they use during the NFL draft is if they are indecisive between two players, they go ahead and draft both of them if they have 2 picks within the same round. I believe this strategy could be used when picking out stocks as well. If an investor is torn between two similar stocks that show strong financials, it would be better to choose both investments rather than risking picking the wrong company.

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