In his latest Pro Pundits column, former Fantasy Premier League champion Simon March asks what FPL managers can learn from the ‘Oracle of Omaha’.
Warren Buffett is considered by many to be the world’s greatest living investor with a net worth of over $89.9bn. Unfortunately for Warren, he’s never played Fantasy Premier League and so he’s never really understood the true meaning of success nor has he experienced the thrill of winning tickets to two Premier League matches of his choice.
However, I do think there’s a lot that we Fantasy managers can learn from the ‘Oracle of Omaha’ and so this article will look at how elements of Buffett’s investment strategy may be applied to FPL.
Warren Buffett largely adopts a ‘value investing’ strategy which essentially means he aims to identify undervalued stock, according to certain criteria, invest in them and then wait for the market to correct itself, thus yielding a profit.
Because the mechanics of the FPL player price system reflect the stock market with investment in both types of asset increasing their price, an obvious application of a value investing strategy would be to identify and buy underpriced players and wait for other Fantasy managers to catch on and buy them too, thus raising their price and allowing you to profit through increased team value.
For example, you could easily argue that the likes of Man City’s Kevin De Bruyne (£10.6m), Sheffield United’s John Lundstram (£5.1m) and Chelsea’s Tammy Abraham (£7.8m) were all underpriced at the beginning of the season and all for varying reasons. These include a return from a long injury for De Bruyne, a misallocated defender classification for Lundstram and the expectation that Abraham would be a supporting rather than starting striker. Their performances have attracted investment thus going some way to correcting their underpricing and, therefore, those managers that identified this investing opportunity early on would have yielded a substantial profit.
Of course, while a high team value can help, it is points that ultimately count in FPL and, while the two often follow each other, value investing of this type won’t necessarily win you your mini-leagues.
However, you can also look at value investing in relation to points by seeking contextual value opportunities. For example, Brighton’s Mathew Ryan (£4.8m), Liverpool’s Mohamed Salah (£12.3m) and Everton’s Lucas Digne (£5.7m) are all probably priced correctly (some might even be overpriced) with respect to the overall season but you could also argue that they are all ‘underpriced’ within the context of their next five to six fixtures given that these are largely favourable for all three and include a Double Gameweek for Salah.
Alternatively, two players may be accurately priced individually but offer a strong rotation, allowing them to be played only in favourable fixtures. Budget players with only good fixtures may offer comparable value to set-and-forget premium assets with more varied fixture difficulty.
There will be many other opportunities for contextual value and so, since much of FPL is about making the most of a finite budget, accurately timing and executing a value-led strategy of this type can create a big advantage.
In some respects, the opposite of ‘value investing’ is ‘momentum investing’ which involves acquiring assets currently increasing in price in the hope that they will continue to grow in the (typically near) future. In FPL, ‘momentum’ would be the equivalent of a ‘bandwagon’; players who suddenly become popular and attract explosive levels of investment.
Buffett famously eschews momentum investing, preferring instead to carefully pick his stocks based on solid, fundamental business criteria and then hold them for as long as is profitable. He is quoted as saying: “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.” This means that Buffett will miss out on the fast profits that come with certain investment bubbles but he will also not be left high and dry when they burst. Instead, Buffett’s success comes from achieving relatively modest but consistent returns, compounded over decades of investment.
Obviously, FPL and financial investments occur over very different timeframes and it’s probably not the best strategy to just stick with your Gameweek 1 team for the entire season (then again…) but, again, there are lessons to be learnt here.
Firstly, it is the importance of understanding and identifying what are the ‘fundamentals’ in good FPL players. As with investing, everyone will have their own interpretation of this but, for me, the fundamentals I look at include; how good a team the player plays in, the significance of their role in that team, how nailed on they are and whether or not they are on set pieces. I tend to add variables such as fixture difficulty and some statistical information on top of those, but these are the basics that I look at first. Current players who have, I think, extraordinarily strong fundamentals in this respect include De Bruyne, Liverpool’s Trent Alexander-Arnold (£7.5m) and Leicester City’s Jamie Vardy (£10.0m) and I always look for these types of players at the beginning of the season and when wildcarding.
As per Buffett, I also try and pick only players that I would be happy to have in my team for the whole season if I were to be hit by that proverbial bus. This isn’t, I stress, with any expectation that I will actually keep this player for the whole season, it just means that, if I have bigger fires to fight in my squad I will, at worst, be left holding on to a fundamentally sound player. I find this helps me avoid hits and, while it inevitably means that I miss out on some bandwagon points, I, like Buffett, get to miss out on the bandwagon busts as well.
Diversification is a classic business school concept which suggests that investing in too few companies or industries is dangerous given the potential of a collapse or industry-wide downturn and, therefore, it is better to diversify investments and ‘spread the risk.’ This concept is applied all the time in FPL when we consider doubling or tripling up on players from a certain team.
Given the prevalence of this concept, it is maybe surprising therefore to hear that Buffett rejects it almost entirely stating that: “Diversification is protection against ignorance. It makes little sense if you know what you’re doing.” In FPL, it must be said, diversification can also offer protection against rotation, fixture difficult and dips in team form, however, following Buffett in rejecting it may also have its own benefits.
For example, I don’t think it’s entirely a coincidence that I won FPL in a year where my real-world team won the Premier League as it meant that there was a selection of really strong FPL assets available in a squad that I, as a long-term fan, understood really well. While I didn’t have any inside information as such, I felt I knew the players, the manager, the system, which types of teams they tended to do well or struggle against and so on. I tripled-up on players from this team almost the entire season and it seemed to pay off.
These circumstances, of course, were pretty lucky for me and I’ve no doubt they helped me to make better FPL decisions that season. In fact, looking at some of the other former winners’ winning seasons, it seems that many of their real-world teams also performed well.
So perhaps it’s true that, if you know your chosen subject well enough, diversification for the sake of diversification is unnecessary, perhaps even detrimental. It’s undoubtedly easier to know your stuff if you’re focusing on fewer clubs and, if you are a particular aficionado of a team or several teams, you might gain more of an advantage from concentrating your efforts and player selection on what you know best than you would from ‘spreading the risk’ across lots of sides.
In summary, I believe that value-investing, a long-term mindset and focus rather than diversification, all principles that have helped Warren Buffett becomes the fourth-richest man in the world, may all also have benefits if applied to FPL.
Considering this, it’s a shame that Buffett has never tried his hand at FPL preferring, apparently, to play the card game bridge which, I understand he’s also pretty good at. Then again, since I think he’d be pretty good at FPL too, maybe Bridge’s gain isn’t entirely our loss…
Simon March is a member of our Pro Pundits initiative, a team of Fantasy managers here to bring you regular advice and updates on their teams. Simon won the FPL title in 2014/15 and has become a fixture on the punditry circuit ever since.
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