What can investors learn from this year’s world series?
First, my condolences to all the Cleveland Indians’ fans. I know what it’s like to see a championship slip away. I’ve rooted for the Twins, Cubs, and Red Sox. From Bill Buckner’s dropped grounder to Sandy Koufax’s complete game shutout in 1965 (on two days’ rest!), I’ve felt that sinking feeling when a victory is so close, but so far away.
Nevertheless, there are some larger lessons for investors from this year’s Fall classic. First, numbers help you understand what’s going on, but only so much. The Cubs came into the series with the best record in baseball and 2-3 favorites, but that didn’t help them win Game 1, which they dropped 6-0. When the Indians won Game 4 so decisively—even their pitcher hit an RBI single—things looked bleak for Chicago. That game put Cleveland ahead 3-1 in the series. A team hadn’t come back from such a deficit in over 30 years. For investors, accounting matters but it doesn’t tell you the whole story. Don’t ignore the numbers, but don’t let them blind you to other issues.
And that leads us to our second lesson: history always that reliable. Yes, the Cubs hadn’t been in the World Series since 1945 and hadn’t won since 1908, but they’ve been a competitive franchise for a long time. They’re a major-league team in a big city where the owners want to win. Just because they hadn’t won in a long time doesn’t mean they couldn’t. Jinxes and curses make for cute story-lines, but they’re not that relevant to what really happens. Investors should understand this, too. Companies can be turned around. Just because a brand hasn’t gotten very far in the marketplace doesn’t mean it never will.
1906 World Champion Chicago Cubs. Public Domain. Source: Wikipedia
Finally, character counts. It’s easy to give in to defeatism. The Indians didn’t quit when they were down by three runs in the bottom of the 8th inning of Game 7. The Cubs didn’t quit when Cleveland pulled to within one run in the bottom of the 10th. Both teams put forward some of their best performances of the season. In the same way, investors should look for company management that takes responsibility when things don’t go well, and that puts processes in place to help them adapt to changing conditions and use any competitive advantages they may have.
The 2016 World Series will go down in history as one of the greatest ever—with Game 7 perhaps the most epic final match—a winner-take-all contest that would end either a 108-year or 68-year championship draught. Both teams were awesome. But as a Cubbies fan, I’m happy that they finally got a little sprinkle.
Douglas R. Tengdin, CFA
Chief Investment Officer