“Price is what you pay. Value is what you get.” –Warren Buffet
Warren Buffet, one of the most successful investors of our time, once said that to be profitable, one should “be fearful when others are greedy and greedy when others are fearful.” This is great advice for investing and fantasy hockey alike. I am happy to pick a player coming off a bad year if I think he can bounce back, and I am quick to avoid players who come out of nowhere to post career years. In this article, I will share some of my thoughts on finding value at your draft and avoiding pitfalls.
Fantasy hockey (all fantasy sports really) is like investing in the stock market. You have a fixed amount of assets—your draft picks or your auction money—which you spend on players, and throughout the course of the season you are hoping to maximize your return on your investment. Some players overproduce compared to their cost (value) and some underproduce compared to their cost (negative value).
The best way to be successful is to look for value in each pick, not just the late rounds. What does this mean? Simply put, the more production you get from a player compared to what it cost to acquire him is his value. Let’s look at a simplified example. Corey Perry and Milan Michalek had similar seasons in 2011 in terms of point production (Perry: 37+23=60, Michalek: 35+25=60,) but Perry was drafted as a high first round pick (4.8 ADP in ESPN leagues) while Michalek was undrafted in some leagues (ADP 230+). This is an extreme example, a player coming off the waiver wire to perform like a first-rounder. Mike Smith is another example: in 2011 he posted fantastic numbers—a .930 Sv% and a 2.21 GAA to go with 38 wins and 10 shutouts, and those that drafted him only had to spend a 20th round pick. Could Smith provide the same amount of value this year? I’m willing to bet that he won’t for two reasons: it’s unlikely that he will be able to reproduce his career year, and he will certainly be drafted much higher this year than last year.
Smith and Michalek were extreme value picks last year, and in my experience a lot of fantasy hockey players are too focused on these home run types of players, but value can come in smaller increments as well…a fifth-rounder performing like a second- or third- rounder, a ninth-rounder performing like a fifth-rounder, etc. A lot of people only concern themselves with the extreme examples, but a great strategy is to try to get value from every pick in your draft. I’ve been in drafts where guys pay attention for the first few rounds to get the superstars they want, and then basically fall asleep after about the fifth or sixth round and then try to scoop a couple sleepers in the last few rounds. Meanwhile, I’m making value picks throughout, trying to get solid return on my investment and hoping to get lucky with the home run value just like everyone else. The key to this strategy is proper evaluation of a player’s possible production in the upcoming season and managed expectations. I will return to this idea in a minute but I first, I want to differentiate between sleepers and value picks.
“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
There is a difference between a sleeper and a value pick. A sleeper is generally regarded as someone who isn’t even on some people’s radar that could perform very well, whereas a value pick is just as I described above—someone who simply outperforms their draft-day cost. You could argue that in the age of the internet and Twitter, there are no more sleepers, but that’s another argument for another day. Sleepers are players that may be poised to “come out of nowhere” and post great numbers, but I find that some of the best value picks are veterans whose stock has fallen and have a chance to rebound—don’t forget that regression to the mean works both ways. Many owners are infatuated with the “next big thing,” the “can’t miss prospect” that they are convinced could come in and light up the light right away. But the reality is that those players are unproven and while yes, they could explode for a huge value, there is just as good a chance that they will fall flat and return negative value. The improvement of advanced stats in hockey allows us to better identify players who could return positive or negative value, and with the proliferation of advanced stats lately, I would prefer to make objective decisions based on a player’s established history in the NHL rather than speculate on an unproven player. With quality metrics that indicate quality of competition, shot generation, zone starts and zone entries, we can look at a veteran’s track record and make an educated guess about his future production much better than we can speculate about young players just coming into the league. Obviously the format of your league comes into play a bit here, if you’re playing in a keeper league it might be more profitable over time to grab a young player who could return huge value, but in one-year leagues I have found that to get value from each of my picks, it is better to target more established players who may be coming off down years rather than take a bigger risk on a player who could be a bigger miss and therefore provide more negative value. If we can identify players that may be candidates to bounce back after a down year, we can more accurately guess what kind of value they could return.
The flip side to this argument is that when I get very late into the draft, I tend to avoid the low risk, low upside type of player unless I am trying to round out my roster. The reason for that is because the potential for huge value goes up the later into the draft you go. A guy who is pretty reliably going to put up 35 or 40 points but doesn’t have much of a ceiling beyond that can pretty easily be found on waivers throughout the season, so at a certain point I’d rather take a shot at a high risk, high reward kind of player. Each owner must decide at what point they want to start making those kinds of gambles. I tend to be risk-aversive in my drafts until the very end, but other owners prefer the thrill of the boom-or-bust picks.
Over the next few weeks, I will be posting a series of statistical analyses of players that I think are candidates to provide good value or risks to return negative value. I wouldn’t classify them necessarily as Sleepers and Busts, because if you draft Mike Smith in the 5th round (I could see him going in the second or third actually) and he shows a slight decrease in output compared to last year, he may not really have been a bust but he certainly didn’t provide much value. Similarly, no one would say that Eric Staal is a sleeper, he’s been a known quantity for years, but I feel that because of his recent history, fantasy players will let him slide a few rounds, and there is a possibility for some great value. However, stats are just part of the analysis, and in the end you must decide for yourself if you think a player will continue his elevated play or will keep slumping
There is one more Buffett quote I wanted to share: “Beware of geeks bearing formulas.”