Coaching Hoops & Investing

By: Yale Bock

“All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory evolved.” ~ Sun Tzu

Coaching and investing are similar because both have specific results an organization is trying to achieve. I coached basketball in junior high school, high school, junior college, and aided a major college program. With coaching, you are trying to have a positive life experience for student athletes and win games. If you are paid to coach professionally, it is simply to win games.

The approach is your strategy for victory. Many coaches view this as playing better than the other team. Others set about by making fewer mistakes than their opponent. The specific tactics a team uses apply to the kind of offense and defense that are employed. On offense, the goal is to play together in a way that allows for high-quality shots without giving the ball to the other team. There are many forms of offense one can use, but everything leads to playing together and not turning the ball over. On defense, the objective is to make it as difficult as possible for the other team to score. On defense, there are two formats: man-to-man defense and zone. Theoretically, by employing man-to-man, if each player does an excellent job, the opposing team will have no weakness to attack. In a zone, there is always a shortcoming. In practice, both have vulnerabilities, but I believe the best chance of success is playing man-to-man. Regardless of the tactic, fundamentals like moving your feet, cutting off certain areas like the baseline, being physical and aggressive without fouling, and helping other teammates should all result in the opponent taking off-balance and contested shots. Your fundamentals on offense and defense are worked on every day, and when the team understands and improves at these basic concepts, it gives the organization the best chance to win games. Ok, great, so how is this like investing?

Investing is the process of allocating capital today to achieve more capital in the future. There are different ways this can happen. One is with some form of income that you receive by owning an asset. A second is having an underlying asset go up in value. A third approach is to sell an asset today to buy it back at a lower price. This is called ‘going short.’ Some combination of the three is employed by investors in nearly all instruments. These are the desired outcomes. The tactics for investing are infinite because investing is a subjective activity. Each entity views it in its own way and has its own background, knowledge, and skill set. My goal is to own high-quality businesses for the entities I manage money. A high-quality business will grow its revenues and profits over an extended period of time from x to two x to three times x and beyond. These entities have unit economics where the business will earn a return on capital higher than its cost of money. As an example, if capital costs the business 6%, the returns are going to be much higher than this, let’s say 12-20% or more. As the business makes profits, it deploys them so the enterprise will generate greater revenue and earnings in the future. The entire process can take place in any industry anywhere in the world. Investing is like coaching because in both, you are using an approach to achieve specific results that are definitive. Let’s turn our attention to what is currently taking place in the capital markets today.

With 40% of the S&P 500 value attributed to seven companies, the index is heavily dependent on these entities. Quite a few of these enterprises are the largest participants in the artificial intelligence industry. Investors own these massive companies, which have experienced tremendous growth over the last few decades. Their values are in the trillions, reflecting the excellence of the businesses, and potentially much more. As such, investors have a simple choice to make. Do you want to own these businesses, either individually or through an instrument like the S&P 500 index? As an alternative, would you choose to own other enterprises that are not these dominant businesses and are not the largest players in artificial intelligence? You could own the other 490 or so companies in the S&P 500, or any one or more of the thousands of other publicly traded companies across the globe. They could be of any size or in any industry. This is the key question for investors in deploying capital for both the short and long term.

The goal of investing is either generating income, having assets increase in value, or some combination of the two. Like a coach who trains the team each day to play the game their way, an investor allocates capital using their preferred strategies. One can only control what one does with their capital, not what the rest of the investment world decides to do with its own. Over time, the quality of the decisions an investor makes will lead to outcomes that determine performance. This can be quick or take an extraordinarily long time. There are often periods where asset prices are stagnant for many years, and then in a month, they have tremendous moves. In these cases, the underlying tactics a company employs over many years show results. The challenge for investors is when the result does not happen in a period that is consistent with what is communicated. If one’s strategy and tactics are correct, at some point, the results prove it over time. With the year ending, now is a good time to review the last year and prepare for the next one. Is the underlying strategy sound? Do the tactics used by each company make sense? What has worked well? Where are the challenges and opportunities for improvement? These are the specific questions I will be considering regarding the assets in our portfolios. It is like coaching hoops, with the analytical piece critical to success.

Originally posted on December 1, 2025 on Y H & C blog and newsletter

DISCLOSURES:

Y H & C Investments may have positions in companies mentioned in this newsletter. Nothing in the newsletter should be taken as an offer to buy or sell individual securities. It is the responsibility of each investor to research the investments mentioned so it meets the return objectives, risk profile, liquidity needs, tax circumstances, and specific issues pertinent to the individual.