Here is a short article on some takeaways from the book I just read ‘The Science Of Hitting’ by Ted Williams & John Underwood.
Three Golden Rules To Hit
Here are the following three golden rules which Ted William followed in his entire baseball career.
- To get a good ball to hit: Ted William had a ‘Strike Zone’. If a pitch would fall into his area only then he would hit it as hard as he could, otherwise he would not try for a home run.
- Proper thinking: According to the author proper thinking is developed by doing proper homework that is like understanding what is the guy’s best pitch, how did they get you out last time, etc.
- To be quick with the bat: As soon as you realize it’s your pitch you must be well prepared and hit the pitch! Well prepared means you must have practiced, practiced, and practiced to hit the pitch.
Now lets see how these rules apply to investing….
This rule requires discipline.
The author says that, “the baseball swing is not a grooved swing. It is more tailored to the individual, more natural and being natural is the most important thing.”
That means each player would have a different swing at which he would be great.
Similarly in investing people have different ‘circle of competence’ i.e. Strike Zone. In investing your strike zone will include the companies which you understand.
You must always invest in the companies which fall under your circle of competence and not swing at a company just because it seems cheap.
Before ending this first rule I would like to quote Warren Buffett here:
The stock market is a no-called-strike game. You don’t have to swing at everything–you can wait for your pitch. The problem when you are a money manager is that your fans keep yelling, ‘Swing, you bum!’- Warren Buffett
The author says 50% of the hitting is dependent on ‘proper thinking’. It is just not studying the pitcher or the situation of the game but to also ‘anticipate’. In baseball when the hitter is about to get its pitch, there are always some voices from the audience ‘guessing’ the pitch. They shout, ‘don’t do it!’.
This looks very similar to the investing world.
In the world of investing people will try to throw their own views on you and will try to convince you about a stock which they own. This generally happens for getting validation.
People generally lack the ability to stand against the crowd. They always want some kind of validation. Sometimes this goes to such an extent that they would give up their own conviction if there is no validation received.
I believe wealth is built through holding stocks for a very long time. To do so you must have a very strong thesis about your investment decision otherwise people will confuse you so much that you might end up doing what everybody wants you to do.
Further, to have such a strong conviction you must learn to stand against the crowd. It won’t be easy my friend, but surely it will be worth it.
The third rule deals with not timing the market.
In simple words as soon as you see an opportunity go for it at a reasonable price, don’t wait for it to fall a little more. By trying to get that ‘perfect’ price you might end up losing the potential of great gains if the price never falls to your ‘perfect’ level.
In the investing world you only need a few great ideas in your whole lifetime so as soon as you see it don’t miss it. Don’t try to get a cheaper bargain just because you think the price is falling.
Therefore, you must also not hesitate to unload your pile of cash whenever you see the opportunity in front of you as long as it falls under your circle of competence.
(Thanks to Mojo Handykraftz for reading drafts of this.)