The Walk Market Why your mutual fund manager rarely steals second
By David Futrelle

(MONEY Magazine) – First baseman Bill Nygren of the Mighty Oaks softball team--oh yeah, and manager of the $4.5 billion Oakmark Fund--is waxing eloquent on our national pastime: "There's nothing like baseball for statistical analysis. The sample sets are so large."

Sure, Nygren gets satisfaction from seeing a well-turned double play, but he also loves all the wonderful data the game generates. Baseball has long been surrounded by armies of amateur statisticians, many of whom parlay their insights into successful, if imaginary, careers in fantasy-league baseball. Others, like Nygren, find their way to the stock market, which is one reason that the book on every money manager's reading list these days is about baseball-stat obsessives.

Written by a former denizen of Wall Street, Michael Lewis' Moneyball tells how Oakland A's general manager Billy Beane, unable to afford a stable of stars, has forged a winning team out of an assortment of misfits no one else wanted; he's the baseball equivalent of a value investor. Legg Mason Value Trust manager Bill Miller is an enthusiastic fan of the book, as is Morgan Stanley strategist Steve Galbraith. "When you run across a colleague you haven't seen in six months, the first question is, 'Have you read Moneyball yet?'" says Nygren. "I haven't seen this kind of bonding over a book in the investment community since [Lewis'] Liar's Poker."

Moneyball is only partly the story of Beane's maverick ways. The book also celebrates Beane's inspiration, a legendary number cruncher named Bill James, who 25 years ago launched an all-out statistical assault on baseball's conventional pieties, looking for more objective ways to measure a player's contribution. He discovered, for instance, that stolen bases were vastly overrated and that humble, unglamorous walks don't get the respect that they deserve. James' brand of stats has attracted a cult following among baseball fans but is still regarded as heresy by most old-school baseball insiders--which is why Beane can still pick up underappreciated players for a song.

We'd like to think that the financial markets behave more rationally--and efficiently--than the market for baseball talent does. And they do. But as long as there are investors eager to throw money at tech stocks long on promise and short on profit, there will be opportunities for investors willing to search out what Morgan Stanley's Galbraith calls "the financial equivalent of a walk."