SORTING BREAKOUT STARS FROM THE OVERHYPED. AND DO WE EVEN NEED TO CARE!?

Everyone wants to find the next breakout stars for next season.

There is so much hype around. 

Some decent players are rising in July for sure but I would say the majority of those being pumped are either poor value or poor quality. 

This isn’t surprising. Unless you have a really good idea of what to look for and the time to scout through every team you are going to struggle to find the real gems amongst a lot of fool’s gold.

Sure, you can buy every kid going if you want. But that spreads you very thin and the big profits on the few who make it are going to be dragged back by the majority who fail.

Perhaps we first need to think about whether we even have to care whether a player is good or not. It’s a hotly debated topic.

After all, all you need is other people to buy them, so the saying goes.

Traditionally this is known as “greater fool theory” trading. I can buy something rubbish as long as someone stupider than me will buy it for more.

Trouble is, everyone buying thinks they are the savvy one and nobody thinks they are the fool. 

How do you know?

Price is the primary indicator. 

If you are buying players that have a strong trend fit before they are over hyped and plastered all over social media, you’ve got the best chance of success.

If you are following pumpers, chasing rises, or suckered in by the people pushing the player on social media you are most at risk of being dumped on.

The particular challenge when holding untested but hyped players at very high prices is that a large proportion of the holders know they are involved in a pump. There is no real loyalty or belief that the player could possibly justify the price anytime in the next couple of seasons.

That makes the price very brittle because the second there is some “bad luck” (i.e a loan move, an injury, or a weak performance or two) many traders will want out quickly. They know it’s a race to get out first.

By contrast, players with more established/reliable dividend credentials are always going to have people willing to prop up the price (barring a really drastic change in circumstances) because those dividend returns underpin them. 

However, well established and reliable players do not deliver the best profits either. You pay a premium for that reliability. This category of player is best held by passive traders who want a relatively low risk and steady income.

Lots of energy is expended arguing between the Neymar/Pogba corner and the Greenwood/Brewster corner. Proven Quality vs Hype/Trend fit.

Personally, I think this is a completely false choice. Why not have quality players who fit the trend?

Given the large capital appreciation on offer, I am not content with passive steady dividends. Nor am I content to hold over valued, risky, and often weak players in the hope of greater fools buying them.

Instead, I want to be finding quality players with a great trend fit at value prices. Last season it was early aggressive buys of the likes of Kai Havertz, Bruno Fernandes, Joao Felix, Thorgan Hazard etc that powered my profits. 

Finding such players early is not easy. Most people are not equipped with the ability or time to do so. Which is why it is tempting to follow an easier path.

But I believe this is where the optimal trading is. Not only does it give you a route to both strong capital appreciation and dividend wins, it means you don’t get into the bad habit of holding onto overpriced risky players for too long.

Risers

Bruno Fernandes

Fernandes looks to be one of the transfer speculation trades that is holding up well.

The transfer is the “right” way. Into the EPL, and for media purposes there is no better side than Manchester United. 

Often, when a transfer looks likely, the price will start dropping as short term/hype traders take their profits. However, there is a compelling case for holding Fernandes at Manchester United.

He’s a strong performance player. Maybe even strong enough to break the curse of Old Trafford. United have not historically been a strong performance side (although I will watch pre-season and early season matches closely to check for any sign of change). 

And, he’s got the star quality and the goals to win some media beyond the hype of the initial transfer.

The price is not the best value anymore. He’s one I have tracked for well over a year now on the site and backed him heavily early. I took profits on almost all of my transfer holds including Fernandes around May which was a fantastic time to do so in general.

In the main, that was the correct call and a good win for site strategy in the members area. But there are always exceptions that have held up well and Fernandes is tempting to come back to.

I just can’t quite bring myself to click buy on a player at this price that has risen so strongly yet (though there has been a small drop recently). But in the event of a price drop after any initial media spree or some strong stats if turning out for United in pre-season, I just might.

With players like this there is always a risk that the transfer falls through and they end up in an ineligible league for another season. That is something to be aware of. But all the mood music suggests an EPL transfer will happen, and there is no obvious financial or contractual barrier that would prevent it.

Mason Greenwood

There are lots of hyped up kids trending at the moment as discussed above. But let’s focus on Greenwood as a player here.

He’s got potential sure. Strong goal scoring record at youth level (this does not always translate to the seniors of course). And there is evidence of a decent all round game that could lead to some good performance scores.

His single 90 minute game vs West Ham was encouraging even though he did not score, there are some nice underlying stats there. It’s just one game, though.

Rotation is likely to be heavy despite OGS’s promise of more pitch time. And Manchester United are not a strong performance side historically (you always have to keep that under review though).

He could well push on in price if he has a breakout season. But a lot has to happen and he could just as easily flop and crash hard. I think he is one of the better youth prospects.

The reason I would never go for this trade now though is the price. Even if he were to hit £5 in probably a best case scenario, that’s a 38% increase.

I know I can find that much more easily elsewhere without carrying the risk of being involed in the next “pump train” which are fun until it derails and everyone wants to get off. 

And we have seen plenty of those with young hyped players already, even in this very kind market.

Still, he looks decent enough and could have a good season.

Fallers

David Neres

Possibly a timely lesson in what happens when traders get excited and assume things. 

He’s crashed from his high 3 months ago of £2.41 down to £1.69 now.

Neres was widely expected to make a big move, possibly to a big EPL club. But those links have faded and he made a strong statement recently suggesting he will remain at Ajax for another season.

Ajax’s excellent Champions League run caused huge over optimism for some of their assets, and you can still see that in the prices in the market today for many of them.

The more I have seen of Neres as a player, the more I like him. His underlying stats are strong and I could see him doing really well at the right club.

He has a lot going for him as a performance suitable Brazil international who will probably transfer to a decent club if not this Summer then next.

This does create opportunities. If it is confirmed he is to remain at Ajax for another season, the disappointment could lead to a further price drop and a good opportunity for a patient holder.

By February next year, he could easily be in demand again due to another Champions League run or in hope of a Summer transfer.

 

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