The extra 2 percent: A fantasy market inefficency

The expression “market inefficiency” has become pretty buzzy in the baseball community. What exactly is a market inefficiency, though?

Simply put, it is something that is undervalued by an industry. Using an example that was in the spotlight in 2011 because of a blockbuster movie, the A’s recognized that players with high on-base percentage were an undervalued commodity during the Moneyball years. How does this apply to fantasy baseball? Expanding coverage of advanced stats though Web sites such as this one, and others like FanGraphs, may have created a new type of under-appreciated fantasy baseball player. That player is one with glowing scouting reports and poor supporting statistics.

There was a time that understanding stats such as xFIP, BABIP, etc. gave gamers a leg up on the competition. The gap between the stat-savvy gamer and the traditionalist is closing as national fantasy coverage is incorporating these SABR stats. Anyone can go to FanGraphs and use its leader board to sort by an advanced stat and identify who was “unlucky.” It’s because of this that preseason sleeper lists are looking increasingly similar year to year. So what’s next?

While I’m not familiar with his work, I am familiar with songwriter and entertainer Peter Allen’s quote “everything old is new again.” Turning the clock back and trusting scouting may be the key to identifying late-round gems. Derek Carty, the former head of the fantasy sports section here at The Hardball Times, and current head of Baseball Prospectus fantasy section, once told me he strives to blend statistics and scouting analysis in his work. Derek masterfully articulates something every fantasy gamer should do. It’s important to use all the information at one’s disposal when ranking players and identifying which to draft.

I look for a handful of things when attempting to separate the wheat from the chaff, failed prospects from potential breakouts. One is whether extenuating circumstances may have caused poor play in the majors.

One example is lingering injuries and routine trips to the disabled list. A second example is a player learning a new position. A player who broke out this past season and falls under both examples is Alex Gordon. After two disappointing seasons in the majors at age 23 and 24, he battled injuries and was forced to make a transition from third base to the outfield. Those who didn’t turn a blind eye to the scouting buzz he created after ripping through Double-A in his professional debut in 2006 were rewarded for selecting him late in drafts or scooping him off league free agent lists.

Not all players who fall under those categories flourish, of course. Jeff Clement is an example of a prospect who was never able to turn the corner.

Another category of failed prospect I look for is one who reached the bigs quickly and struggled initially. Matt Wieters is a recent example. He spent under a season and a half in the minors following his selection in the 2007 amateur draft. In 2011 he began scratching the surface of a skill set that prompted Chuck Norris-like memes.

Conversely, Rick Porcello is a hyped prospect who got to the show quickly but hasn’t turned into a fantasy asset. Porcello serves as a cautionary tale for the importance of keeping up to date on scouting reports. Drafted as a hard throwing prep pitcher with a lethal slider, he adopted an approach of pitching to contact and throwing a two-seam fastball predominantly while mostly scrapping the slider. Coincidentally, Porcello bumped up his slider usage this past year, throwing it 20.1 percent of the time compared to just 9.3 percent of the time his first two years in the majors. With that in mind, he could be a player worth monitoring in 2012.

I also tend to gamble on someone who has received few opportunities in the majors. A sub-category are prospects who were jostled around, getting called up and sent down, or who saw inconsistent starting time and rode the pine frequently (think Brandon Belt last season).

Going back a few seasons, you could hold up Nelson Cruz as an example of this fourth category of prospect. Cruz pummeled Triple-A pitching as a member of the Brewers and Rangers organization, but didn’t receive a full time gig until 2009 after finishing the 2008 season with a flurry in 31 games with the Rangers. As has been the case with every other category of prospect worth gambling on that I’ve discussed, category four has a poster boy for failure: Brandon Wood. He has had no problem beating up on Triple-A pitching, but his contact struggles and questionable hit tool have caused him to fall on his face with both the Angels and Pirates.

As with most things, moderation is suggested. Rostering a full team of potential late bloomers is a recipe for disaster, even at the cheap cost of late-round picks or minimal auction dollars. Glue guys that fill out rosters are important, but passing on a few for a lottery ticket or two can result in a great return on investment and possibly even a fantasy title.

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Comments

  1. Ben Pritchett said...

    Very true Josh…Dan, I think Josh gave Brandon Belt as an example (totally agree). I would throw Dexter Fowler in this camp as well. I’m working on an article called “Guys I like more than you”, and both of these guys are in it along with Andre Eithier, David Price, 2nd tier catchers, and David Wright. I’d say none of those guys could be considered Sabr-darlings for 2012.

    Also, you could use James Shields as a 2011 example of a missed advanced stat breakout. You credit his change in approach, much more of a “scout-based” breakout. Can Pablo Sandoval be charted like this for his 2011 resurgence? I would say yes.

    Well done, Mr. Shepardson.

  2. Dan said...

    Good article. I always look for what I call late bloomers. All of your reasons are worthy of note , but also take in the fact that some players just take longer to develop. Many of them have always excelled, but when they reach the majors they get a taste of failure. Some just take longer to make adjustments that they’ve never needed before.
    Really would have liked you to give a list of players you think had circumstances that have slowed down their progress at being really good players. Which players may put it together in 2012 ? As I read the article, I really thought you would list a few players. Was a little disappointed when I got to the end and you hadn’t . But it was still a good article.

    Dan the Bluesman

  3. DShea said...

    Not sure I understand your point.  Guys that were hyped, but then failed to put up good stats see their value drop.  It’s possible the market over-reacts and adjusts their value too far down.  But, how do you identify the over-reactions?  You point to prospects who were injured, rushed, or jerked around, but in every case you can find examples where the market reaction was appropriate and where it may have over-reacted.  The critical issue is what information could help someone find the undervalued player? Of course, once you tell us that, it’s public information that the market starts to use!

  4. Derek Ambrosino said...

    DShea,

    I think one of the underlying points is that in order to gain value on a pick, it helps to have “space” for the value to come. That means that there’s a greater chance for profit when there is disagreement about a player, or lack of information about a player, or impending change around that player. Those variables will take many shapes and forms. Josh is simply pointing out some general situations he likes to gamble on. Of course, you’re not going to be successful all the time – if you was a way to do so, there wouldn’t be the asymmetry of opinion, and therefore there wouldn’t even be nearly the opportunity to profit from those situations.

    Perhaps in this era of advanced stats in fantasy baseball, one of the categories of players that may become undervalued are the – good fantasy players, not as good real players.

  5. Jeffrey Gross said...

    Porcello is not a pitcher I plan to go near. His peripherals have improved no more than the league average pitching line has. Even with the increased slider usage

  6. fbraconi said...

    This is an interesting article but it seems to veer a bit off point towards the end. The inefficiency Josh proposes at the outset is that some prospects have much more potential than their minor league stats suggest, and that more attention to scouting reports can help identify them. In general I think that’s true though it depends where guys in your particular league are getting their information.  If most are reading, say, Baseball America, the scout favorites might still be over-valued. In any case, Raul Mondesi and Hanley Ramirez are two players who come to mind as having great scouting reports but undistinguished minor league performance. In those cases the scouts were right and I for one missed out on them.

  7. Josh Shepardson said...

    @ Dan

    Thanks for the commentary.  I did give some thought to putting together a list of players (and may do so in a follow up article).  I opted not to because I was more interested in getting the general idea written about and posted.

  8. Josh Shepardson said...

    @Ben

    Thanks Ben.  Fowler is a great name (more on him in my upcoming comment).  While the general premise fits the other examples you gave, the fact they had major league success and track records strays a bit from my thinking in writing the article.  As far as Wright goes, I like him a bit this year.  The changes to Citi could really benefit him, and they may put Bay back on the map (to some extent anyways).  Guys like Lucas Duda and Ike Davis become a bit more intriguing too.

  9. Josh Shepardson said...

    @bohman

    Post-hype sleeper definitely applies to some of my examples above (namely Alex Gordon and Matt Wieters).  My thinking, which was perhaps poorly laid out in the article, was broader scope than what I’d consider a post-hype sleeper.  A guy like Dexter Fowler is a great example.  In standard re-draft leagues, Fowler had some buzz in fantasy games, but not to nearly the same extent as Gordon/Wieters.  His stolen base totals in the upper minors were good, but not great.  His success rate in the minors as a whole were lackluster, but those who read his scouting reports knew he was a burner.  The same idea could be applied to Justin Upton and his power.  Sure, he had decent home run totals in 2007 at Double-A, but they failed to exemplify his power tool and future projection.  On the flip side of the coin, scouting reports that questioned Kila Ka’aihue’s bat speed (most referring to it as slider bat speed), should have served as a bigger red flag to some of us who were excited about him (I’m in this camp) than they did.  Hopefully this explanation clears things up a bit.

  10. Josh Shepardson said...

    @DShea

    Your point about fantasy gamers overreacting is what I was aiming to point out.  As fantasy gamers have become more “prospect happy,” in their drafting, they also seem to have become less patient.  There is a certain degree of needing to move on to the shiny new toy when the old one displays flaws initially.  As far as identifying the over reactions and the appropriate adjustment, that’s the tricky part.  Some of the factors I weigh into identifying who fits which category include age, past performance in the minors (did a guy succeed in the low minors but struggle in the upper minors for instance), and the scouting reports themselves. How much weight I put on the scouting reports depends on how much I trust the source.  I’m going to value a scouting report from Kevin Goldstein, Jim Callis, or John Sickels more than that of John Doe with limited, or no, credentials and an upstart website.  This is the gut feel part of things that is murky.  Thanks for reading and commenting.

  11. Josh Shepardson said...

    @ fbraconi

    Your comment does a good job of articulating my thinking in regards to minor league stats not always telling the whole story.  As you point out, knowing your league mates is important in determining what prospects may not end up undervalued.  The knowing your league mates part of your comment is something I should have, and meant to, address in the article.  If you’re in a stat savvy league, Jeremy Hellickson isn’t being drafted as high as his 2011 ERA and WHIP would warrant.  In those leagues, someone may be able to benefit from reaching a bit beyond where his advanced stats would warrant him being selected.  The thinking being that he may be a talented enough pitcher to make the necessary advancements to close the gap on his surface stats and underlying stats.  Going a bit further, those that read Hellickson’s 2011 BA Prospect Handbook write-up know that his change-up was his best graded pitch (70 grade), and a true strikeout weapon.  His K/9 rate was underwhelming, but if you look up his PITCHf/x info, you’ll see he got a healthy number of whiffs with the change-up.  Better using that pitch could result in a leap in his strikeout rate.  Conversely, if you are in a league with even a few owners that aren’t well versed in advanced stats, there is a good chance Hellickson will get drafted too early to reap the rewards of any reasonable advancements he could make as a pitcher.

  12. Hunter said...

    as for over 99.9% of us playing fantasy baseball, we’re all just gathering info and interpreting. We’re not scouts, nor do any of us have ‘sources’. Like the one comment above, you have to find trusted sites/authors.

    But who’s to say even the best websites, know what organizations feel.

    Maybe the reason the guy didn’t get a full-time chance is the team doesn’t have confidence? maybe the player uses a minor injury as an excuse? Hard to say. We’re all just playing a version of the stock market or poker.

  13. Josh Shepardson said...

    @ Hunter

    You got it.  Even the best websites and authors aren’t always privy to the details of why a prospect is handled a certain way.  Obviously some sites/authors have more access and sources than others, and it’s important to distinguish between who is who.  This post delights me because it allows me to rant about a certain “journalist,” who illustrates the importance of recognizing who provides reliable sources and who isn’t.  I began following Scott Swaim (MLBInsider I believe is his handle) on Twitter shortly after the winter meetings.  In his profile on Twitter he claims to have broken the Pujols, Furcal and Cuddyer signings.  He has since “broken,” Bartolo Colon to the Diamondbacks and Evan Longoria demanding a trade from the Rays.  Suffice to say, Colon isn’t a Diamondback, and he has since apologized to the Rays and Longoria about his report.  Of course, he didn’t own either mistake.  He deleted his erroneous claim of Colon to the Diamondbacks, and blamed his “inside source,” from the Rays for bad information.  The lesson here is to beware those claiming insider information until you’re positive it is the truth.  While my rant may be a bit off topic,  it felt good, so I don’t care haha.

  14. Josh Shepardson said...

    @Jeff

    Don’t confuse putting Porcello on my watch list with me drafting him in any leagues.  The reason I’m even willing to put him on my watch list is because he already has shown the ability to induce groundballs at a high rate, and his walk rate has been notably better than league average.  Even though he hasn’t felt much of a benefit from his increased slider usage yet, I’m not ready to write it off.  He’s still very young, (turned 23 in December), and as someone who leaned on his fastballs so heavily, could still be working through proper pitch sequencing.  Last year his slider had a 12.7 percent whiff rate, and his change-up sat at 11.9 percent.  Any changes that involve using them more, and his two-seam and four-seam fastball less should bump up his strikeout rate.  His two-seam fastball and four-seam fastball had laughably low whiff rates of 3.8 percent and 4.0 percent.  Also, looking at his PITCHf/x data from the first game of the season through July 1st, and comparing it to his data from July 1st through the end of the season, he didn’t really start using the slider more until later in the season.  Not surprising, his strikeout percentage improved more than 2 percent.

  15. Victor said...

    I would think a guy like Delmon Young would qualify as one of these players. Also, Gordon Beckham comes to mind. What do you guys think?

  16. Josh Shepardson said...

    @Victor

    I’ll always have moderate interest in Young.  He has solid raw power, but lack of plate discipline and propensity for hitting the ball into the ground have kept it in check.  I find myself checking his plate discipline rates and batted ball data every year.  As for Beckham, he’s an interesting example.  His game has completely eroded, but he’s already flashed what he can do when everything is right.  Not sure how much coaching over turn has come with Ozzie Guillen’s departure, but I’ll be keeping tabs on Spring Training and the usual fluff stuff talk of changing approaches, pressing less and things of that nature.  I wouldn’t fault anyone for having had enough of Beckham, but I could see myself giving him one more crack if I can find a sliver of hope for him with enough digging.

  17. Victor said...

    I almost forgot to mention one more who I would like your input on: Alcides Escobar and Colby Rasmus. Rasmus is one in particular who has frustrated people indefinitely. Can he get it together? Both players come from pretty successful minor league stints.

  18. Josh Shepardson said...

    @Victor

    Not a big Escobar fan.  He’s always been much more highly regarded for his defense, than his offense.  He doesn’t walk much, which hurts his OBP and SB opportunities.  I do think he’ll hit for more average than he has to date, but I’m not sure he’ll ever be more than passable in that category (i.e. not an asset, not a hindrance).  As far as Rasmus goes, I like the team switch, even though the initial results haven’t been good.  I’ve never been as high on him as some have.  His stolen base success rate isn’t good, but I think he could turn into a guy capable of hitting more than 25 home runs.  His average is trickier to guess. He has had troubles against southpaws in his career (but did hit .270 in 2010), and strikes out more than he should for his current power output.  He did make strides in the strikeout department, so that’s promising.  He has talent, and is the type of player that fits into the context of this article.

  19. Josh Shepardson said...

    @ Tex

    Andrus has gotten progressively better, and I’m a fan now.  Logically, your assessment makes sense to me.  I wish I knew what his ultimate power ceiling was.  The difference between being a guy who could eventually his 8-10 HRs is different than one that can hit 18-20.  In the short term, I’m thinking the former is reasonable.  I love his ability to get on by hit and walk, making him a strong bet for big run scored totals.  At the least, he’s a good option at a thin position.

  20. Tex Pantego said...

    Speaking of post-hype players that could breakout.  I watch EVERY Ranger game plus attend lots of Spring Training games, and I’m bullish on Elvis Andrus taking his game to another level.  It’s easy to forget he’s only 23. 

    The Rangers have been super cautious with his batting approach, having him focus on either moving Kinsler over or just gettting on base for most of his career, but the 2nd half of 2012, the reins seemed to have loosened a bit and his gap power increased, and just his overall approach at the plate seemed to mature.  I think the key is, when the count is in his favor, he’s laying off marginal strikes that he can’t get good wood on, and though still a hitter likely to go deep into counts, he has gotten more aggressive on fat pitches in hitters counts.
     
    He’ll never be a basher, but you don’t have to be basher to hit 20 in Arlington.

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