Writer's note: to learn about The Dynasty Investor process and our explicit track record, check out this intro article [here] and the running back specific article [here].
Quick recap: To recap the process, the way we measure value in the Dynasty Investor is by looking at a player's KeepTradeCut (KTC) vs. his fantasy point per game (PPG) in a ratio called the price-to-earnings (P/E) ratio. P/E = KTC / PPG / 10. Then you compare that player's P/E ratio to a like-for-like cluster of players from an age, production, and potential perspective. Players in the same cluster should be valued similarly in the market on a P/E basis. If they aren't, then an arbitrage opportunity exists to create value.
Jonathan Taylor Update
There is currently a lot of noise around Jonathan Taylor and the Colts. NFL.com reported that Colts owner Jim Irsay and Taylor met in late July after Irsay commented about the running back market. After the meeting, it was reported that Taylor requested a trade. Then according to Ian Rapoport, Taylor was "away from the team getting additional rehab on his ankle," but now "is back today [8/14/23]." However, he's still on the Physically Unable to Perform (PUP) list.
All this matters in the near term, but at the Dynasty Investor, we are more longer-term focused, and if you can look through the noise, you might be able to create some value by going out and buying Taylor now.
Upgrade to BUY Jonathan Taylor
Today we are upgrading Colts running back Jonathan Taylor to Buy, which means we are adding him to the top pick list and actively trying to acquire him for the 2023 season. His price target is ~6700 KTC, which is ~15% upside from current levels.
At the Dynasty Investor, we believe in reversion to the mean as a process over the long term but with certain caveats. We think values are more about how they line up from a relative basis, not an absolute basis, i.e., just because a player's value tanks and looks cheap vs. where he has traded in the past doesn't mean you should 'buy-the-dip.' How his value relates to players similar to him is most important.
Charting
We look at players' KTC as a measure of prices and the market. Above is a KTC graph of Taylor over the past few years. On the right-hand side of the chart, you can see a slight fall off from 7/24 at a KTC of 6226 to the low on 8/2 at a KTC of 5748 or an 8.32% drop. The ~8% drop is significant in the near term, but the real drop happened last year when he fell from the high 8000s KTC to ~6000 KTC, a fall of ~30%. Or if you even take it back to the end of the 2021 season when he was one of the highest KTC-priced players (even relative to QBs/WRs) at 10,000 KTC, a fall of ~40%.
It's hard to know when a big dip is finished while going through it. It can be like catching a falling knife, it's probably better to let that knife hit the ground and bounce around a little, and then you can walk over and pick it up off the floor. Looking at the chart above, there have been a few successful buy-the-dip opportunities. There was a considerable dip in November of 2020 from nearly 8000 to 6000 KTC, and then he bounced back and went higher. Then he had another big dip in August of 2021, down to the 7000 range from the 9000 range, where he quickly bounced back and became one of the highest-priced dynasty assets overall.
Reading this chart, it looks like Taylor has bounced around on the floor long enough. He looks undervalued and should, over the long term, bounce up to at least above that 6500 level but be in that 6500 to 7600 range.
Clusters and Relative Value
Going back to the relative perspective, we think Taylor should be compared to like-for-like players like Bijan Robinson and Breece Hall and should be valued from that perspective. Below is our running back cluster chart. This chart is about a month or so dated but still relevant. Please bear with me; I will update it before the season starts.
Using this clustering process, Taylor finds himself in the less than 25 years old and 18+ PPG cluster. Right now, Taylor is just over 24.5 years old, and as you can see, he is getting closer to that age 25 cluster cut-off line we have, so right now, we have him in the Robinson/Hall cluster, but next year we'll have to move him to a new cluster and valuation category. As a side note, we give Bijan an even higher multiple than Hall/Taylor because, at the moment, we see Robinson as a valuation exception.
Dynasty Trades
- Buy Jonathan Taylor
- Sell 2024 mid 1st + Dalvin Cook
- Buy Jonathan Taylor
- Sell Dameon Pierce + 2023 mid 2nd
- Buy Jonathan Taylor
- Sell Nick Chubb + 2023 late 3rd
Thanks for reading! If you want to learn more about Dynasty fantasy football and the P/E ratio, please follow me on Twitter @_jasonstein and let me know your questions and how I can help.