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Miguel Cabrera, left, celebrates the American League’s first run Tuesday at the All-Star Game with AL teammate Jose Bautista, whose sacrifice fly scored Cabrera. (SHANNON STAPLETON/REUTERS)
Miguel Cabrera, left, celebrates the American League’s first run Tuesday at the All-Star Game with AL teammate Jose Bautista, whose sacrifice fly scored Cabrera. (SHANNON STAPLETON/REUTERS)

INVESTING

Five lessons in investing from the boys of summer Add to ...

The Midsummer Classic has come to a close, as baseball’s American League all-star team beat the National League 3-0, thanks in part to a sacrifice fly from Toronto Blue Jays slugger Jose Bautista, which sent base runner Miguel Cabrera of the Detroit Tigers to home plate to score the game’s first run.

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The July all-star break cleaves the major-league baseball season in half and gives us time to reflect on the first half. As it turns out, we can learn about more than just baseball from the first 80-odd games.

Like baseball, investing requires practice and patience – and a few numbers, too. And it so happens that Jack Ablin’s dream job was to be a general manager in the major leagues if he hadn’t fallen into the investing world instead. “Baseball,” he says, “is the closest thing to a free market in sports.”

As baseball hit pause for the all-star break this week, the chief investment officer of Bank of Montreal’s BMO Harris Private Banking spoke to The Globe and Mail about the insights investors can gain by studying the first half of the 2013 season.

Investing takes patience – just ask Jays fans

Everyone with a soapbox and an imagination predicted the Blue Jays were going to win the World Series this year, after general manager Alex Anthopoulos picked up New York Mets knuckle-baller R.A. Dickey and pretty much every good Miami Marlins player before the season began. Aside from an 11-game winning streak in June, finally giving them a win percentage over .500, the Jays are now back four games from breaking even. They may have sent four players to New York for the All-Star Game, but they’re at the bottom of their division.

But this roster is just getting started. Mr. Anthopoulos’s facelift made for a significantly different team, and with the added handicap of major injuries to Jose Reyes and Brett Lawrie, it hasn’t had time to form a cohesive unit. What Jays fans – and investors – need is patience. Baseball, much like financial markets, requires a long-term investment strategy if you want to safely get returns. “You can’t expect to have instant results,” Mr. Ablin says. “That’s what the Blue Jays are experiencing right now.” If you commit to an investment, you can’t expect instant gratification. Buying and holding will deliver you the results you need over time.

If you don’t think of the long-term implications of every move, you could wind up like former Jay Yunel Escobar, whose childish actions made it no surprise he was sent packing in the Miami trade. The newly minted Marlin is now playing for the team in the National League with the most losses. Investors should think well before they make rash decisions like Mr. Escobar.

Moneyball’s no joke

The Oakland Athetics have one of the lowest payrolls in the league, but are topping the American League West division at .589. That’s higher than the New York Yankees, whose major-league-topping payroll is nearly four times that of the A’s, at $229-million (U.S.) versus $60-million. But the Oakland team, whose value-focused approach to roster selection has made it serious postseason contenders since 2002 (Moneyball, anyone?) are careful to calculate the value that each player adds to the team.

Oakland’s evidence-based approach, which uses nontraditional statistics such as on-base and slugging percentages to gauge the worth of a player, allows the A’s to build value for a winning team in spite of their minimal payroll. “Value is important, especially for small market teams,” Mr. Ablin says.

Taking the value approach to investing is also a worthwhile endeavour. The idea is to trade optimism for pragmatism and find cheap stocks with strong value in their business, rather than a strong market price. Once you assess the right companies, you buy low and wait for the value to kick in. By focusing on actual value instead of hype, this approach delivers over time without breaking the bank – just like the high-flying, low-budget A’s.

You can beat the big guys

The Yankees have far and above the highest payroll in the majors, yet rank fourth in the AL East, .537 at the all-star break – just ahead of Toronto. The Boston Red Sox top the AL East at .598, with a payroll $78-million smaller. And the St. Louis Cardinals top all of baseball with a .613 winning percentage on a payroll of $115-million.

Consider the Yankees a metaphor for another New York icon: Wall Street. It’s something nice to aspire to, but you can get ahead just fine on your own with hard work. “The large-market teams are like the big institutions that have all the data, all the connections, all the advantages,” Mr. Ablin says. “And then you’ve got individuals as small-market teams that don’t have the benefit of the size and scale.”

In theory, the little guy should be at a disadvantage, right? Look to baseball, and you’ll see teams with smaller portfolios are beating the juggernauts. If you’re diligent, you can do this when investing, too. “With careful planning and attention to detail, you can still keep up with the big boys,” Mr. Ablin says.

Keep an eye out for turnarounds

The Pittsburgh Pirates’ 20 consecutive losing seasons through 2012 made them the worst team in the history of U.S.-based professional sports, but they’re nothing to mess with this year. At .602, they’re just behind St. Louis, showing strong pitching and allowing the fewest runs in National League. The Pirates are a “remarkable turnaround,” Mr. Ablin says.

Suddenly, Pittsburgh is the team to watch in the second half of the season. The Pirates are a lesson in the importance of keeping a keen eye: A stock price might be in a drought for years, but if you watch for signs of positive change in a company, you can buy low and reap profits. “Sometimes investors who are willing to get involved in a seemingly dire or ugly situation are the ones who are going to be rewarded,” Mr. Ablin says.

But it really does need that keen eye. Just ask Mr. Ablin about his beloved Chicago Cubs. Mr. Ablin, a Chicago native, has “been disappointed for decades,” and this season is no different. The Cubs have a losing skid of their own – it’s been 105 years since they’ve won a World Series – but there’s far less optimism for them than the Pirates. The Cubs’ wins come in at .452 in the first half of the season and their 17 blown saves is the most in the NL. Not every stock, or every team, can turn around once it’s at the bottom – and it’s up to you to figure out who can.

And the obvious

Sometimes baseball players need a little help, albeit illegal, to beef up their numbers. You don’t want to risk your precious dollars like that. “Drugs may help you in baseball,” Mr. Ablin says. “But they probably don’t do much for you in investing.”

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