Houston Astros: Players and Investments

Houston Astros prospects are investments, not unlike mutuals funds and individual stock.

Major league franchises, like a stock exchange, constantly sell and buy these investments to hopefully set themselves up for short and long-term gains. And the Houston Astros could be in the market to buy, depending on the circumstances.

For example, to acquire a true difference maker via a trade during the offseason usually requires parting ways with top prospects. And look what the Astros have scattered throughout the entire organization…top prospects! Players like A.J. Reed, Mark Appel, Vincent Velasquez, Daz Cameron, Kyle Tucker, Alex Bregman, Francis Martes, and many others are littered throughout the now highly ranked farm system.

Prospects are similar, for example, to mutual funds.

In short, mutual funds are usually comprised of multiple stocks that are designed to help limit the loss that may befall on an investor. In other words, diversify. Kind of like a baseball franchise with a solid farm system; it is a way of managing risk. If one top prospect doesn’t pan out, yet the farm is loaded with other top prospects, then Team A doesn’t take as a huge of a hit than another franchise, Team B, who has a more shallow farm system would. The Astros of the late 2000’s could attest to being Team B and how not having a solid farm system can be detrimental to an organization’s long-term health.

Acquiring premium talent in baseball, on the other hand, is somewhat similar to acquiring individual stock. An individual stock is a type of financial instrument that an investor may receive tremendous gains or experience dreadful losses. Or it could land somewhere in between.

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Spending big on a high yield stock, or premium talent in this discussion, is for the adventurous at heart. Sometimes it is required to sell off a percentage of your mutual fund holdings to have the resources necessary to acquire the individual, er, premium talent. And no matter how great the potential may be, there isn’t a guarantee about how the “stock” will perform in, say, five years. Many variables shape the financial world, and it is no different in baseball. This even applies to premium talents like Jose Fernandez, Andrew Miller, Aroldis Chapman, and Freddie Freeman.

So, is it worth selling off a significant percentage of your mutual fund portfolio (farm system) just for one piece of a notable stock (premium major league talent)?

That is the question the Astros organization must answer, but in a baseball sense.

Attempting to acquire a Fernandez or a Miller would require not only a high volume of prospects but also of higher quality. Like trading multiple shares of your best mutual fund stock for one share of Apple stock.

The probability of great reward is present as the after mentioned players would significantly upgrade the major league roster. But the flip side to this coin is the possibility of tremendous losses. What if the Astros do acquire a player of jaw-dropping talent, but yet other circumstances prevent the team from experiencing a notable return of its investment? And what if the prospects traded away thrive and lead their new organization to new (or familiar) heights in the baseball hierarchy?

That would be a decision that could haunt a franchise for years to come. But it is just that, what-ifs. Careful analysis must be a part of the evaluation process in buying stocks or trading baseball players. However, to be the best sometimes you have to be willing to take a chance on making the one move that could set yourself up for a stretch of unrivaled success. The Astros, I believe, are pondering this very question.

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And if they so choose, the Astros are finally in a position to go out and prove their mettle as an organization. It may end up not being the right decision in one way or another depending on the player they target, but hey, baseball is all about chances. Let’s see if the Astros like their chances during the Winter Meetings.