Last Updated: 2018-12-12
As Christmas approaches, the NBA season begins to heat up. As wrong as they may be, the handicapping market becomes entrenched in certain valuations. Thus, there are specific teams that prove to be advantageous to either back (buy their stock) at discounted prices or fade (sell their stock) at inflated prices.
This week I will be purchasing the Miami Heat’s undervalued stock.
The Heat have gotten off a to a slow start. The season is almost two months old and the Heat are still under .500. The handicapping market has overreacted and shifted the Heat’s valuation to one of a lower tier team.
The main reason for Miami’s slow start has been the countless injuries the team has suffered. Out of the team’s 26 games, Goran Dragic has played 14, Wayne Ellington has played 16, James Johnson has played 11, and Tyler Johnson has played 19. These are key players in Miami’s rotation and none of them have played in over 73% of the team’s games this season. For a team that’s biggest strength is their depth, a shorter rotation has proven to be detrimental to the Heat’s success.
For the first time this year, all four of those players are back in Miami’s lineup this week. This will improve the team immediately. Unlike most teams in the NBA, Miami lacks a true star player. Instead of 1-2 players to carry the load, Miami relies on a collective effort from their group of role players. Thus, the loss of a few cogs can trickle down and hamper the whole team. No longer will Miami have to play people out of the position. The team can now function again with everyone serving their specific role.
In addition to being full-strength, another reason why I am bullish on the Heat is because starting slow is nothing new for this team. With the same core of players, Miami started the 2016-2017 season 11-30 and the 2017-2018 season 11-13. These slow starts can be attributed to Miami’s veteran roster taking more time than others to get into shape. Historically, the team begins to have success by late December once the players are in shape.
One other reason why Miami consistently improves over the course of the season is because of their elite coaching adjustments. Similar to other sports, the best coached teams usually improve during the duration of a season because good coaches make the necessary changes to better the team. Over the course of a season, Erik Spoelstra does a fabulous job of identifying his team’s problem and subsequently finding ways to remedy it. Spoelstra isn’t afraid to mix up the lineup and try out new things to jump start his team.
If this recent West coast swing was any indication, the Heat are about to take off and perform like the playoff-caliber team that they were expected to be. Buy the Heat’s stock before the market makes the necessary adjustment.
Los Angeles Clippers
This week I will be looking to sell the Clippers’ stock.
The Clippers have been one of the nice surprise stories of the early season. For a team that was pegged to be in the lottery, the handicapping market has been caught off guard by the Clippers’ 17-10 start. However, this team is due for a hard regression and their stock should be sold immediately.
Similar to the Heat, the Clippers do not possess a true star player. Instead, the Clippers’ success can be traced to the outlier performances they have received from their core players. Somehow this Clippers’ team has manufactured a top 5 offense, despite the absence of any All-Star players on the roster. However, the team’s offensive production won’t be sustainable as the team’s key players are due for a sharp regression.
Tobias Harris has been the Clippers best player this year. He is shooting career highs from the field with a 51% field goal percentage (46% career average) and 40% from the 3-point line (36% career average). Both of these statistics are way above what we have seen from Tobias during his 11-year NBA career and a regression appears imminent. A majority of his shots are contested mid-range jumpers. Unless you are Kobe Bryant or Michael Jordan, it is extremely unlikely to shoot contested mid-range jumpers at an over 50% clip during the course of a full season.
Shai-Gilgeous Alexander’s success has been the most surprising of any Clipper this year. Originally pegged to be long term project, the rookie has taken a strangle hold of the starting point guard spot and has performed far better than expected. Unfortunately, SGA is still a rookie and it’s just a matter of time until he hits the rookie wall. Additionally, teams will compile tape of his tendencies and be better equipped to game plan for him in the future.
Danilo Gallinari is also having a resurgent year and has been a key contributor for the 17-10 Clippers. While his statistical regression isn’t as much a concern, Gallinari’s long-term health is. Danilo has only averaged 49 games played over the last 4 seasons which makes his season long outlook murky at best.
Lou Williams may not be having his best statistical year, but he is still the Clippers’ go-to guy in crunch time. His recent injury could prove to be catastrophic for a team that already lacks shot creation.
The Clippers have enough grit and talent to stay in the playoff picture but sustaining their 63% winning percentage for the rest of the season isn’t likely to happen. Sell the Clippers’ overvalued stock.
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