Dec 14

Football Index: Cash Builder Series - Fourth Installment

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Introduction

If you haven't done so already, and have not yet tried Football Index (“FI”), I'd suggest that you read our Football Index beginner's guide as it explains most of the key concepts (including dividends, buying and selling players and commission). If you'd like to follow along, you can join Football Index here.

Welcome to the fourth article in my Football Index cash builder series for 2019/20. At the start of the season, I deposited £100 onto the platform and my goal is to grow that balance as much as possible. Each month I will top up my balance by adding another £100 (if I'm able to), but the focus of this series is percentage return on investment rather than cash balance.
If you haven't already, and are new to the Index, please give my beginner's guide a read and if you have any questions please reach out to me on Twitter @FPLBraveheart.

The state of the market

The Football Index market continues to grow with a market cap at the end of December was £91 million (an increase of £8 million since the November article). The market cap is the total amount invested in players and as it continues to go so too will there be natural growth throughout the Index. One way of working out if your trades are successful or not is by comparing them against the natural growth of the market. If you beat the rise in the market cap then you are most likely to be a profitable trader (rather than someone simply being lucky by being in the right place at the right time). 

Last January there was considerable growth in Football Index, according to the FI Market Cap Twitter account, between January to March last year there was an increase of 52.7%. It is unlikely that this year will see identical growth as there were other factors at play last year with a share split on the horizon (essentially the share price of each player was divided by 3 and in turn the amount of shares held by traders in that player was trebled). 

My strategy: overview 

In the opening article of this series, I said that I would be going with an in-play dividend hunting approach. My reasoning for that was that there were a lot of players under £2 who score or assist frequently and so represent good value for returning regular dividends. However, in light of the massive 57% increase in performance dividends announced at the end of October, I decided in November to diversify my strategy and have more than one strategy by which I would profit.

To summarise the strategies I'm using, I've been targeting players for a number of reasons:

  • they are a young player who has potential to become the next big thing (“youth strategy”),
  • they are priced quite low because they are not frequently competing for performance dividends but they score and assist a lot (“IPD strategy”),
  • they are currently injured (and have been for quite some time) and are nearing a return to first-team action (“injury strategy”),
  • they are likely to move teams soon and so may have an improved chance at performance or media dividends (“transfer speculation”),
  • they are regularly putting up good scores for performance and/or media dividends and are likely to return regularly (“long-term holds”).

What is in store for 2020?

As we are at the start of a new year, I wanted to take a forward look at the expected cycles this year to find the opportunities. The first half of the year will (rightly or wrongly) be dominated by Euro 2020 and players who check a lot of the above boxes (i.e. are playing in the latter stages of European competition and will be taking part at the Euros).

Warren Buffett once said that the stock markets are a mechanism for transferring money from the impatient to the patient. With that in mind, there is considerable scope to profit from those who are able to identify an opportunity and are happy to wait until that foresight pays dividends.

A lot of traders have already started adapting their portfolios so that it is heavy in Euro 2020 players. Despite that, I think there is still an opportunity. My goal for the next month will be to target players who are likely to go far in the Europa League (as all of the matches in the knock-out stages are gold days so will pay out maximum dividend payments), play in one of the top five leagues and are likely to have the Euros this summer. 

How was December?

In December I was very hands-off with my portfolio, the reason for this is that I was happy with my players and had no additional cash to buy other players. However, I did not forsee a selling-off of players on the continent as they approached their winter breaks. This is something I will need to remember for next season.

At the end of December, I held shares in 5 players (with one other player in the sell queue).

Let's see how they got on...


Trent Alexander-Arnold

  • Liverpool
  • Defender
  • Bought for: £4.33
  • Current price: £6.79
  • Dividends per share: £0.11 (2.54%)

TAA continues to be one of the players best suited to the performance matrix. He had a colossal performance against Leicester with three assists and two goals. He increased by 37p in December and managed to bag dividends in both performance and media. He is in my portfolio as a long-term hold and he will remain there for as long as he is fit and in form. Up 59.91%.

Joshua Kimmich

  • Bayern Munich
  • Defender
  • Bought for: £4.72
  • Current price: £4.25
  • Dividends per share: £0.01 (0.21%)

Kimmich decreased by 23p in December as I was caught unawares with how the market would react to the German winter break. I have my Kimmich shares up for sale at present as I struggle to see him becoming flavour of the month again while he has a dark cloud of a potential positional change hanging over him. I believe that I could make the money I have tied up in Kimmich work harder and feel it is currently stagnating. Down 15.49%.

Mattia Caldara

  • AC Milan
  • Defender
  • Bought for: £0.46
  • Current price: £0.49
  • Dividends per share: £0.00 (0%)

Caldara has been out for a very long time but is on the verge of a return. He is a goal-scoring defender and my plan remains to retain him until he breaks back into the Milan team. We do not yet know how he will perform under the new performance matrix but at his current price I think he is a good option for holding to try and make some profit on his return to first-team football. Up 4.39%.

Florian Thauvin

  • Marseille
  • Midfielder
  • Bought for: £2.36
  • Current price: £2.45
  • Dividends per share: £0.00 (0%)

I purchased Thauvin late in December as he is on the verge of returning from injury to a Marseille side that is performing well in Ligue 1 and is likely to make next season's Champions League. With Thauvin and the next player in my portfolio, I'm attempting a "buy the dip" strategy which is where you get a player after he has just suffered a price dip. Normally when a price dips significantly, there will be recovery quite soon afterwards (for an example of this, check the graph of Memphis Depay in the last month following his ACL injury). Up 3.28%.

Marcel Sabitzer

  • RB Leipzig
  • Midfielder
  • Bought for: £2.28
  • Current price: £2.40
  • Dividends per share: £0.00 (0%)

Sabitzer was another player who I bought "on the dip". Plays in a RB Leipzig side that is performing well in the Bundesliga and Champions League. They play a very inconsistent Tottenham side in the Last 16 and unless the English side improve significantly, I can see Leipzig progressing. As the cherry on top of the cake, Austria will be playing at the Euros so it is likely that Sabitzer will continue to rise as the tournament approaches. Up 5.27%.

Cash Builder Summary

  • Balance at start of December: £221.19
  • Balance at 31 December (minus expected commission) : £223.62
  • Monthly Return on investment (%): +2.86%
  • Total Return on investment (%): +21.86%

If you haven't already, and are new to the Index, please give my football index newbie guide a read and if you have any questions please reach out to me on Twitter @FPLBraveheart.

Rules

  • I will invest £100 in the first week of each month,
  • I will buy no more than 5 players,
  • I will look to short-term trades (i.e. 30 day/monthly cycles) rather than longer term,
  • Every trade I do, whether profitable or not, will be discussed in this series of articles.

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