Warren Buffett is the world's greatest investor, with a keen eye for identifying talent and a steadfast adherence to a proven set of principles. But could he lead you to victory in your 2013 fantasy football league?
There's a lot of overlap in the type of analysis that makes a good investor and a good fantasy football player, so I think Buffett could give you some winning advice for your fantasy team.
Look for sound management
Buffett likes to buy into companies where he trusts management to do the right thing for shareholders. Good management will usually stick to what it knows, and the same is true in football.
A head coach who was a former QB and offensive coordinator, like Sean Payton of the Saints, could provide an extra fantasy point boost to a talented quarterback like Drew Brees or a mid-tier wide receiver like Marques Colston. But a running back will need to have good hands to provide good value in that offense -- in this case Darren Sproles is a perfect fit.
But a running back in a pass-first offense without good receiving abilities, for example Eddie Lacy of the Packers or David Wilson of the Giants, will not fare as well. That's why Buffett would likely have avoided Wilson and Lacy in the fourth round of fantasy drafts, and bought into Victor Cruz (NYG) or Randall Cobb (GB) instead.
As a fantasy football player, make sure a head coach is doing what's best for the player you're drafting. As an investor, make sure management is doing what's best for the shareholder.
A wide moat
There's a reason Adrian Peterson was taken off the board first in most drafts -- his moat. In economic terms, a moat is a competitive advantage that makes it difficult to copy or emulate a business -- e.g., Coca-Cola's brand recognition. In fantasy football, the same applies. One of Adrian Peterson's advantages over other top-tier running backs is that he doesn't have anyone competing with him for touches.
The only player with a higher percentage of his teams carries this season is Doug Martin of the Tampa Bay Buccaneers, and that's only by 0.3%. Of course, these two guys were going off the board quick, so you have to be lucky in order to grab them. But this strategy could work well in later rounds. DeMarco Murray (DAL), who is getting the ball on 86% of running plays, is providing solid value for his owners (most drafted him in the fifth round).
Looking for undervalued companies (or players) with solid moats is a good strategy for success.
Always be liquid
In his 2008 letter to Berkshire Hathaway shareholders, Buffett wrote, "We never want to count on the kindness of strangers in order to meet tomorrow's obligations." Portfolio management is a lot like roster management -- you have to be liquid in order to succeed. For Buffett, liquidity comes in the form of cash. For fantasy owners, liquidity comes in the form of waiver priority and a willingness to trade.
What happens when your second-round pick gets injured -- cough Steven Jackson cough -- and you don't have his backup on your roster? You either need a high priority on waivers to pick up a good replacement, or some liquidity on your bench. You might be able to trade a good wide receiver for a serviceable running back, and fill in the slot with your bench, but don't count on your league mates to give you a great deal.
Staying liquid allows you to field the best possible team every week, just as it allows you to buy the best new investment opportunities.
Of course, buy low/sell high
The key to trading in fantasy football and investing in the stock market is the same, "be fearful when others are greedy and greedy only when others are fearful." Buffett wrote those words in his 2004 letter to Berkshire Hathaway shareholders.
So maybe that means you drafted Michael Vick in the 10th round as others passed on him for injury concerns. Now, still an injury risk, it might be time to trade him if you have a good backup from an earlier draft pick and a need elsewhere. Players like Reggie Bush are in the same boat.
Roddy White, who hasn't scored more than two points in a game this year, and Doug Martin, who hasn't had a TD since week 1, might be good players to buy low as their owners get frustrated. Look into using some of your liquidity to buy up these top-end players before they start to rebound.
In the long run, good companies and good players both normalize toward their intrinsic value. Keep this in mind when searching for buying opportunities in the market.
'You don't need to be a rocket scientist'
In Warren Buffett Speaks, Buffett says "You don't need to be a rocket scientist" to be a good investor. You don't need to be some super-genius to win your fantasy league either. Just pay attention to the things that matter, ignore the things that don't, and strike when opportunity presents itself.
Hey, that's pretty good investing advice too!
Invest like Buffett ... in actual stocks
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.