NBA Draft Lottery … and lottery stocks
Tonight is the NBA draft lottery. As a 76ers fan, I will be rooting for them to get the first overall selection. Of course gaining a higher overall pick does not guarantee that any team will make the correct selection.
In the 1998 draft, the 76ers had the 8th pick and selected Larry Hughes. The 9th pick was Dirk Nowitzki (Mavericks) while the 10th pick was Paul Pierce (Celtics). So given the higher pick, the 76ers selected an athletic wing player, while the Mavericks and Celtics selected Hall of Fame players who each won an NBA championship for their respective teams.
In the 2003 draft, the Cavaliers wisely selected Lebron James with the 1st overall selection. However, the Pistons selected Darko Milicic with the 2nd pick, passing on three potential Hall of Fame players in Carmelo Anthony, Chris Bosh, and Dwayne Wade … bad move Pistons.
And of course, there is the infamous 1984 draft. Hakeem Olajuwon was selected first overall and won 2 NBA championships for the Houston Rockets. With the 2nd pick, The Portland Trail Blazers selected Sam Bowie, passing on a guard from North Carolina. That guard’s name – Michael Jeffrey Jordan. Arguably the best NBA player ever, who won 6 NBA championships, was passed over for SAM BOWIE!!! (Queue Trail Blazer fan cursing once again).
NBA aficionados understand that winning the lottery can generate multiple championships (Duncan and Shaq – 4 championships a piece, Lebron – 2), so many (including myself) will turn on the TV tonight and anxiously await the results. However, unless the number 1 pick turns out to be a HOF player that can dominate for a decade (such as Shaq, Duncan, and LeBron), the most important part for a successful NBA team is the player selection, as the Spurs (in conference finals right now) have been able to rebuild without high draft picks by making smart selections later in the draft (Manu Ginobili, Tony Parker, Kawhi Leonard).
To tie it back to finance, here is a link to an old post about “lottery stocks”
The link above is a good read during the commercial break tonight. The gist of this article is that investors appear to overpay for lottery type stocks – those that had the highest past daily returns over the past month.
Have fun watching the draft tonight!
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Definitions of common statistics used in our analysis are available here (towards the bottom)