During my childhood, one of my favorite books was Casey at the Bat. It is actually a poem by Ernest Lawrence Thayer. It tells the story of the Mudville Nine, a baseball team trailing by two runs in their final inning. With two outs and little hope, the crowd feared their hero, Casey, wouldn’t get a chance to bat. But the next two players reached base, building momentum and setting the stage for Casey to win the game with one mighty swing. The crowd held its breath…
This poem came to mind recently as thoughts of investing in the current market intersected with my watching the Major League Baseball (MLB) playoffs and my son’s baseball team. We often hear phrases like “the market is up” or “the market is tanking,” but those headlines rarely reflect the reality of a well-diversified portfolio. “The market”, typically referring to the S&P 500 index, is heavily concentrated—about 35% in just eight tech-focused stocks. These few companies disproportionately influence whether the market appears to be up or down. But what about the other 492 companies in the index? Or other asset classes like mid-cap, small-cap, and international stocks? A truly diversified portfolio includes a mix of these segments, each playing a role in both portfolio return and management of risk.
Back to baseball—MLB rosters look a lot different now than when I was growing up, but organizations still aim to not build a starting lineup of 9 homerun hitters. They assemble well-balanced rosters with players who get on base and players that will sacrifice to move runners over with bunt or fly ball. They find players with the propensity to deliver in clutch situations. Teams can score a lot of runs and win a lot of games with walks, singles, and doubles. Don't get me wrong, MLB front offices and managers want players that can hit homeruns too, but their approach can lead to strikeouts. Power hitters are exciting, but oftentimes the risk-reward tradeoff doesn’t pay off.
Spoiler alert: Casey swung and missed, striking out to end the game. There were many ways the Mudville Nine could have won that day—some didn’t require Casey to hit a homerun. But the crowd pinned their hopes on one dramatic swing. In investing, we see similar behavior: chasing flashy stocks or trends in hopes of a big payoff. At The Ryan-Jones Group, we take a different approach. We build portfolios with a lot of singles and doubles, patient at-bats that result in walks, and the occasional home run. Sometimes, we even endure the bumps and bruises of a hit-by-pitch to get on base. The goal is consistent progress—getting runners on base to increase the odds of scoring runs and winning over time.
I wish my beloved Texas Rangers had followed that playbook this season. Oh well, as former Rangers manager, Ron Washington said, "That's the way baseball go." There’s always next year!
