If you were a baseball fan, you would know what "fat pitch" means. A fat pitch is when a baseball pitch appears so "fat" that you can't miss it and you can knock it out of the park. There is also a fat pitch approach to investment.
The theory goes like this. As a batter in baseball, you are under pressure to hit. You get only three strikes. Miss three opportunities on the trot and you are out. That's it. As a batter, you therefore have to hit at pitches that you would probably prefer not to hit. You can't wait for the "fat pitch", as you have to hit. Net result, you spend your innings trying to make the most of skinny pitches.
In the sharemarket, investors constantly take swings at stocks that should be left alone, because they put themselves under pressure. The pressure comes from wanting to make money more quickly than is likely. It comes from impatience and perhaps even a bit of delusion, encouraged sometimes by the industry itself, that there is money to be made and everyone is hitting fat pitches and all you have to do is step up to bat.
But the truth is that in the sharemarket there is no three-strikes rule and no pressure, other than the pressure you put on yourself. In this market you can relax, especially for those of you already in term deposits wondering whether to get back in.
You can stand in the market and watch pitch after pitch after pitch go by without hitting anything, just waiting for the "fat pitch".
Wait as long as you like. It will come. Many colleagues sit in this industry for just that. Patiently awaiting their opportunities. It is an environment full of them. The worst thing you can do, especially in this market, is need to hit.
So how do you relax? It's all about expectations and adopting realistic goals. This market is very unlikely to change your life at the moment or make you rich quick, and your best bet is probably to wind your expectations back completely and plan a life without any sharemarket income at all. From that base expectation, anything you make in the sharemarket is a bonus rather than a necessity. Now you're a batter without a three-strikes rule. Wait and watch. You'll still need to be vigilant, because fat pitches at the moment don't come often. You are going to have to look for it.
Here's how.
Identify what you consider to be a fat pitch There are still great companies around, they just have bad share-price trends. Look for the turn. Identify quality stocks.
Time when to hit Having identified a fat pitch, time the change in trend. You'll need a combination of technical and fundamental analysis. Use every tool you can get. The value guys on their own will get the shares right and the timing wrong. The technical guys will get the timing right and the shares wrong. You need both and the flat spot in this market is the perfect time to learn.
Look at the dogs Those "rubbish shares" are going to be opportunities once the glass becomes half-full again. Fat pitch stocks are right in front of you waiting for the market. Look for good stocks with temporary problems. The ASX, Computershare, Macquarie and Iress come to mind.
If you can't find a fat pitch, hold cash It gives you flexibility, the option to move quickly and buy. It is "The Bat". You can't hit without it. Cash is a powerful weapon. It focuses the mind on looking for a fat pitch. If you go and stick it in some skinny pitch, you will spend so long concentrating on that, you will be distracted from seeking out fat ones.
Don't trade a lot Using the fat pitch approach you don't need to trade (hit) a lot. You are looking for long-term opportunities, not day trades.
Right. Now wait for the pitch.
Frequently Asked Questions about this Article…
What does “fat pitch” investing mean and why is it relevant for everyday investors?
“Fat pitch” investing borrows a baseball metaphor: it means waiting for an obvious, high-probability buying opportunity you can't miss. For everyday investors it’s a reminder to be patient, avoid pressured or speculative trades, and look only for clear opportunities where risk/reward is strongly in your favour.
Why should I ‘wait and watch’ in the current sharemarket instead of trading more often?
The article explains there’s no three-strikes rule in the sharemarket, so you don’t have to force trades. Waiting reduces the chance of hitting ‘skinny’ pitches that disappoint, helps manage impatience and unrealistic expectations, and increases the likelihood you only buy when a genuine opportunity — a fat pitch — appears.
How can I identify a fat pitch stock using everyday investing tools?
Start by looking for quality companies that have poor recent share-price trends but solid fundamentals — you’re looking for the turn. Combine fundamental analysis (to pick the right companies) with technical analysis (to time the change in trend). Use every tool available so you get both the share selection and the timing right.
What role do technical and fundamental analysis play in timing a fat pitch?
Timing a fat pitch requires both: fundamentals help you choose the right businesses, while technical signals help you confirm the change in trend. The article cautions that value-only investors can pick good shares but mistime entry, and technical-only traders can time moves but pick weak stocks — you need both.
What should I do if I can’t find a fat pitch right now?
Hold cash. The article calls cash “The Bat”: it gives you flexibility, the ability to move quickly when a real opportunity appears, and prevents you from wasting capital on skinny pitches. Cash also focuses your search for genuinely attractive buys.
Which ASX companies does the article mention as potential fat-pitch opportunities?
The article points to examples of good companies that could become fat-pitch opportunities once their problems are temporary and sentiment improves — naming ASX (the exchange itself), Computershare, Macquarie and Iress as stocks that come to mind.
How should I set my expectations for market returns right now?
The recommendation is to lower expectations: this market is unlikely to change your life or deliver quick riches. Plan as if you don’t need sharemarket income; any gains you make should be treated as a bonus rather than a necessity.
How frequently should I trade if I’m using the fat pitch investing approach?
Don’t trade a lot. The fat-pitch approach focuses on long-term opportunities and patience, not frequent buying and selling or day trading. You wait for high-conviction setups and act decisively when those rare opportunities appear.
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