In the Baseball Hall of Fame in Cooperstown, visitors can see a glass-covered case created by Ted Williams, one of the greatest hitters in baseball history. The painted baseballs in the case have numbers written on them which reflect Ted’s opinion of his batting average if he were to only hit pitches in those specific locations in the strike zone. This display is referred to as a “heat map.” I read that Ted would refuse to swing at pitches in his cold spots, even if it meant striking out.
As an investor, I have seen many deal pitches that are outside or on the corners of my hot spots. These have included real estate development deals, oil and gas deals, “FinTech” deals, and more. Some have appeared interesting, but they were poorly positioned on my heat map because I didn’t understand them well enough. Having the patience to let these deals pass is often very difficult (Fear of Missing Out) and is an underappreciated discipline.
Letting investment pitches go by will not lead me to strike out. I can let 99 pitches pass and still be at the plate to crush pitch 100. Staying in my hot zones will inevitably lead me into fewer investments, but my investments will be made with a high degree of competence, risk management, and acceptable outcomes. In other words, I’m more likely to have success and avoid the losers.
Here is an example of a hot zone deal from my early days as a real estate investor. I bought a house in Houston, TX in a neighborhood where I owned other property. I used nearly all my cash – $100,000 – to close the deal. I had done my homework and I understood the true value of what I was investing in. This pitch was in my sweet spot and I took a big swing. I cleaned out the house and listed it on the open market. It sold for $166,100 just 31 days after I bought it.
This experience was very instructive. It reinforced in me the value of patience, commitment, and crushing the pitches that are in the hot zone.
