For those that are new to Football Index and are active users on Twitter, some of you may be wondering why some of the seasoned traders are all up in arms about why the prices of all these youngsters are so high; here’s why.
Since the start of the summer, there has been a huge influx of new traders coming onto Football Index which is fantastic to see. This new money has resulted in share price increases for the usual suspects (Ronaldo, Messi etc.) but the interesting thing is that a tonne of money has been pumped into the players of the future – to the point where some of them are around £2.50-£3.00/share. Why has this happened and why are experienced traders calling it madness? Here is my view.
I’ll take you back to when I first joined the Index in Spring 2017. I heard an ad on the radio for Football Index inviting me to invest in real football players just like the stock market. “Easy,” I thought. “Just buy the young players, sit back, relax and watch their prices grow.” At the time, Kylian Mbappe was an 18 year old playing for Monaco and was tearing it up in the Champions League.
I thought that this guy was only going one way and that was up, up, up! I joined Football Index and sure enough, Mbappe kept on rising. Suddenly a move to PSG was on the cards and I was ready for the big time; ready to watch him skyrocket. But once the deal was announced his price took a big drop! I took to Twitter to ask those who I was following, “What’s going on?” The answer I received was pretty simple – look at who he is playing with – Neymar.
What I had failed to understand is the importance of Performance Buzz (the dividends paid for the best performing players according to stats) in the price of a player. Dividend payouts can be as high as 18p/share so they are definitely something to take notice of when determining the value a player’s price should be. What did this PSG move mean for Mbappe and his dividend winning potential? Surely he’s going to a better team and will do even better? The answer – No! Mbappe may have been on the same team as Neymar, but he was now competing every single game for PB with Neymar. That’s Neymar who takes the free-kicks, the penalties and is the crown jewel of PSG. If the team is going to play to support anyone’s style of play – it was to Neymar’s.
Let’s throw some facts at this from looking at Neymar’s dividend returns vs Mbappe’s since this PSG move.
Media Buzz Wins since Aug 2017 – 213p
Performance Buzz Wins since Aug 17 – 85p
Total – £2.98/share dividend payout
Media Buzz Wins since Aug 2017 – 0p
Performance Buzz Wins since Aug 17 – 32p
Total – £0.32/share dividend payout
At time of writing, Neymar is hovering around £13.78 and Kylian Mbappe only just recently broke £9). If we were to see a repeat of last year’s performance , that would represent a 21.6% ROI for Neymar and a 3.7% ROI for Mbappe – quite the difference. Does this suggest that Neymar is under-priced or that Mbappe is over-priced? To me I would argue the latter.
So what am I getting at? Many of you may be thinking who am I to say that people are wrong to put these youngsters to the price they are. After all, there is no such thing as a wrong strategy if you buy a player, their price goes up and you sell at a profit. What I’m saying is that a lot of them are players that will be lucky to see the bench, never mind minutes on the pitch.
Their dividend returns for the year will most likely be 0-2% ROI in a lot of cases while they are still at the same price as the likes of Otamendi (52p/share in dividends since Aug 17), Marcelo (40p) and Stones (48p), I suspect a few of those holding the younger players will take notice and soon realise that they are missing out on these lucrative payouts and may sell up to get themselves a piece of that dividends cake. After all, who doesn’t like cake?