I am a baseball fan. More to the point, I am a Yankees fan, a real Yankees fan who stuck with the team through the lean years in the 1980s and early 1990s. And I just want to point out that New York just took three of four from Boston.
One of the things I think about is: how does a baseball player get in the Hall Of Fame? That is really hard to do. There are a lot of great players who end up on Hall Of Fame ballots but never make it. Think about the guy who just missed the cut last year, Craig Biggio. He had more than 3,000 hits, which is usually automatic entry. More doubles than any right-handed hitter in Major League history, No. 15 in runs scored. Biggio is one of the greatest players of all time, and is certainly the best player to ever play for the Astros. And he still missed the cut. So what does it take to get into the Hall Of Fame?
To be a Hall Of Famer, you have to be dominant at your position for a decade or more. Biggio definitely has the numbers, but was he a dominant player? That's not the word that comes to mind. Incidentally, the guys who made the cut last year, Greg Maddux, Tom Glavine and Frank Thomas -- were all dominant.
Imagine you saw those players play in their rookie years. Would you have been able to spot the talent? Would you have been able to look at Maddux in his rookie season and say, that guy is going to be a Hall Of Famer?
You see, that is what investing is all about. It's like looking at a bunch of players in their rookie year and trying to figure out which ones are going to be dominant for 15 years or more. There are plenty of young players that have raw talent. But do they have that day-in and day-out kind of durability, and more importantly, those personal qualities it takes to be productive over the course of a long career?
Let's have a look at some rookie stocks. Facebook (FB), Tripadvisor (TRIP) and Yelp (YELP). These are all great companies that have had terrific early years. Which one will make the Hall Of Fame? Facebook, of course. So why bother with Tripadvisor and Yelp? That's a serious question. You don't need to be clairvoyant to know that Facebook is going to be dominant in social networking for years to come. Why? Because they've dug a moat. Because they're visionary. Because their corporate culture, strange as it might be to some people, works. Facebook, someday, could be in the Dow, which is like the Hall Of Fame for the stock market.
So wouldn't it be great if you could go back in time to the 1950s and buy up a bunch of stocks before they got added to the Dow? Actually, there was a guy who did that. Warren Buffett. He bought these stocks with tiny price-to-earnings ratios and massive dividend yields and held them over the course of a Hall Of Fame career. He picked the Hall Of Famers (it's not as hard as you think) and held them forever. As I've said before, I'm more of a long-term guy. Active trading gives me a migraine.
Is Bryce Harper going to be a Hall Of Famer? Stephen Strasburg? Great question, right? All the talent in the world, but do they have the durability and the drive? Though there was one guy who had Hall Of Fame written all over him from the time he was drafted. Everyone knew it. Who is it? Derek Jeter. Think about why.