Growth and Value

There are two general camps of investing in the world of stocks: growth and value. Growth stocks are ones where you pay a (significant) premium to what the stock is currently worth on its balance sheet because the company is expected to grow revenue and profits at an inordinately high rate, making the purchase price justified over a certain period of time. Value stocks are ones which have been beaten down and can be purchased at a discount to accepted norms of the balance sheet, ie low price/earnings ratio, low discount to “book” value etc.. Why the mention of these financial investment terms on a football blog? Simple- drafting is all about selections based on a philosophy of growth and value. To quote Wonder, it is not WHO you take but WHERE you take him. Therein lies the denominator which ultimately determines the aggressiveness of a draft choice. Initial Public Offerings (“IPOs”) are always about growth, because often these younger companies have more growth prospects than balance sheet track record and stability. In 1986 Microsoft went public and was one of the greatest examples of a successful growth stock, always outperforming what was seemingly a rich stock price. For every successful growth pick, there are many less-heralded companies that fade into oblivion. Think Dot-com high fliers that went from triple digits to zero. They never made a penny in earnings and eventually they cratered. In the football world, paying up for ‘growth’ means using a very high draft pick for someone who has skills but not necessarily the track record of performance ‘yet’ on the field. Johnnie Lam Jones was the ultimate draft growth pick disaster. The Giants have recently made two growth picks (coincidentally both in the second round): Osi Umenyiora and Sinorice Moss. At the time, picking Umenyiora was a reach, but the Giants felt that his ‘raw’ talents would lead to great success down the road. They were correct. (And well before this blog was started, I was on record as not being happy… here was a guy who barely knew what football was who was short on experience being taken in the SECOND round! Not value by ANY stretch.) But obvly the ‘promise’ of Sinorice Moss, who was given a pedigree because of his brother, has yet to deliver the same rewards. Such is the life of a growth pick. The latest examples of classic value picking is Justin Tuck and Ahmad Bradshaw. Tuck fell to the third round because of an injury. Bradshaw fell to the 7th round because of “off the field” criminal activity. Bradshaw was a classic bear market where his valuation eventually becomes so compelling that you expend less resources on the promise of performance returning down the road. Great value because of WHERE he was chosen.