Dynasty GAAP Memo: Penny Stocks
I am a CPA who fits the typical accountant stereotype. I enjoy writing technical accounting memos, accounting research (yes, it’s a thing), and analyzing the financial statements of a business. In accounting, you often must evaluate qualitative and quantitative factors during complex transactions to forecast future performance. I have found that the outlook and rationale of evaluating business transactions parallels another interest of mine, dynasty fantasy football.
In dynasty, we are given both quantitative factors (athletic scores, draft capital, college production, etc.) and qualitative factors (camp hype, team situation, injury history, etc.) that we must consider and evaluate to derive an estimate or projection of a player. Then, we must take calculated risks based on our team’s overall financial statements (i.e., current roster and league). I could go on and on with accounting-based puns and comparisons, but I think you get it.
I will note that I will write in the form of “accounting memos.” For anyone who has not been exposed, the format is very standard. Each memo will start with the “purpose.” Next, it will outline the applicable “guidance” or accounting literature utilized and supply background. Last will be the analysis and conclusion. The goal is to state the issue and quickly address it. My write-ups will follow this same logic.
To summarize, welcome to “Good at Analyzing Players” or “GAAP.” And yes, this is a play on “Generally Accepted Accounting Principles” and my wife did come up with it.
Purpose:
The purpose of this memo is to identify penny stocks that are low-cost high-reward investment opportunities for dynasty managers.
Background:
One of the best parts of dynasty is that “there is no off-season.” Like the stock market, players’ values can fluctuate from day to day and even hour to hour., Managers need to deploy their capital to maximize production while accounting for longevity to derive a successful dynasty. There are plenty of investment strategies and principles available (productive struggle, zero RB, anchor RB, indefinite-live, etc.) to accomplish this. These strategies should be considered anytime you make an investment in a player. Investments can be a startup draft, an in-season trade, a rookie draft selection, or a waiver claim. These investment decisions are what derive your investment portfolio, or dynasty roster.
Within each roster, there should be diversity. In investing, diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited and reduces the volatility of your portfolio over time. A successful dynasty roster is properly diversified. See a few investment examples below:
- Index Fund or Roster Cornerstones
An index mutual fund provides broad market exposure and is considered ideal core portfolio holdings for retirement accounts. For dynasty managers, these are our cornerstone players. These are the young elite players that we can “set it and forget it” for years and who go within the first one or two rounds of startups. These are players like Justin Jefferson, Bijan Robinson, and Patrick Mahomes in Superflex.
- Mid-Cap Stocks or Ascending Young Player
Mid-cap (or mid-capitalization) is the term utilized for medium-sized companies based on market value. These are not the Apples and Googles of the world. Instead, these are stocks that are growing but are not household names yet. For our dynasty teams, these are the players like George Pickens, Brandon Aiyuk, or Zay Flowers.
- Liquid Cash or Rookie Draft Picks
Cash is a liquid asset that can always be spent when an investment opportunity arises. Similarly, dynasty managers can make investments in players during rookie drafts or trade away picks for different assets.
However, those assets and players that are traded on the stock exchange are often known across your league. Most savvy investors and dynasty managers know their value and there should not be a lot of associated market inefficiencies. This memo is going to explore the “pink sheet” investments.
“Pink sheets” is a term used to describe stocks that trade over the counter (OTC). These companies do not meet the requirements for listing on a major stock exchange. These stocks are often called penny stocks because they trade for less than one dollar per share (i.e., pennies). Penny stocks have significant volatility and have a substantial inherent risk but can also present high potential for reward due to the low cost to acquire. The most recent case of this is Puka Nacua. He was a dart throw in the third and fourth round of rookie drafts and now is a dynasty cornerstone just eight weeks later.
This memo will explore similar players that profile as ‘penny stocks’ that investors might consider.
Resources:
- Sleeper: Great interface for looking up historical statistics
- DLF Dynasty Rankings: Best Dynasty Rankings in the Industry
- DLF Average Draft Position (“ADP”) Data: Best resource to gauge current player value. Based on community-sourced Dynasty Startup drafts.
Analysis:
To identify potential penny stocks that are worth investing in, I reached out to a few DLF contributors and derived a penny stock “tip sheet.” For this exercise, we identified players that could potentially be had for a third or fourth round rookie pick and are worth pursuing due to the upside. See the players below:
Investment: Josh Palmer, WR LAC
Analyst (DLF): Eric Dickens
Age: 24
Draft Capital: 2021 Third Round
DLF ADP:
Discussion:
Many dynasty managers wrote off Chargers WR Josh Palmer once the team drafted rookie WR Quentin Johnston with the 21st pick in the 2023 NFL Draft. With both Keenan Allen and Mike Williams slotting in as starting wide receivers, the addition of Johnston seemed to push Josh Palmer to the bench, limiting his opportunities. In DLF’s October ADP, he was drafted around 125th overall, as WR59. With Mike Williams out for the year with a torn ACL and a potential out in his contract for the Chargers in 2024, the door is open for Palmer to keep his current role as the downfield threat opposite Allen in the starting lineup. While he is currently the WR51 in fantasy points scored (seven games due to the Chargers’ bye), he is the WR34 since week three.
Palmer is one of those players who seems like he has been in the league forever, but this is only his third season, and he is only 24 years old. He has a 78% snap share on the season, is 31st in air yards per game, and is averaging almost fourteen yards per target. He is in line for some positive TD regression, only having one so far this season. His latest (minor) injury may keep him out a week or two, which potentially opens a nice buying window. While his value has rebounded some with the slow start by Johnston and the aforementioned Mike Williams’ injury, he can still be had for the price of a mid-third round rookie pick in many leagues. If he is sitting on a competitor’s roster, especially a rebuilding team, offer them a third, or even a late second, and see if they will bite.
Investment: Khalil Shakir, WR BUF
Analyst (DLF): Nick Muzzillo
Age: 23
Draft Capital: 2022 Fifth Round
DLF ADP:
Discussion:
Shakir was a trendy under-the-radar pick this summer and a cheap addition to the end of your bench that would hopefully pay dividends this season. Shakir had a strong camp this summer competing for the Bills’ slot role, but was slow out of the gate in the early season catching only five passes through the first six weeks. It appears as if Buffalo has been bringing him along slowly, as his activity and snap percentage have continued to grow each week. In weeks seven and eight, Shakir finally put his talent on display as he has now caught 10 passes in the past two weeks. It is not safe to say just yet that he has finally taken over the slot wide receiver role, but it is trending towards that.
Shakir may not be the best target for this exercise, but there are a few reasons why I am choosing him for this exercise. First, he is still cheap, and at a reasonable price, for a high-powered offense that is beginning to hit its stride. They have an elite quarterback in Josh Allen who can make others around him better and appears to have found pieces that can help him. Dalton Kincaid is flashing the space player who can eat in the middle of the field that will open the underneath space/routes for Shakir to use his 4.43 speed and create explosive plays. Secondly is what I just mentioned – his speed. 4.43 speed does not grow on trees and is a premium in today’s game. He will get every opportunity in Buffalo to utilize that weapon and find ways to get the ball in his hands. Lastly, the Bills desperately need to find a slot receiver who can create mismatches at the second level, and Shakir has the talent to do so. He also has reliable hands and plays bigger than his size.
Looking at the DLF trade finder, Shakir is still going for ridiculously cheap being included as a throw-in or for a future 3rd or 4th. If you are looking to add at the end of your bench as a contender, or are in a rebuild and looking for future pieces to build around, Shakir is a great target. He may not develop into a weekly positional starter, but an upside flex player who you can rely on to give you double-digit points is worth the price.
Investment: Rashid Shaheed, WR NO
Analyst (DLF Writer): Matt Price
Age: 25.2
Draft Capital: Undrafted
DLF ADP:
Discussion:
Shaheed impressed as a rookie in 2023. He put up an incredible 2.78 yards per route run (YPRR), joining names like Ja’Marr Chase and Justin Jefferson, who also averaged more than 2.5 YPRR as rookies. Granted, it was over a much smaller sample size, and Shaheed saw 34 targets on 46% of drop backs.
As a sophomore, he continues to be involved in the offense as a deep threat. Outside of Chris Olave, Shaheed has been the primary downfield target for the Saints in 2023. While he can be a boom/bust kind of play, the booms are worth it, as he displayed in Week Eight, finishing as a fringe WR1 with 18.3 PPR points on only three targets.
Shaheed’s peripheral numbers have been good this season. He has increased his route participation to 72% in 2023, up from 46% as a rookie. His YPRR has dipped to 2.01, but he has already eclipsed his rookie season target share with 12.5% and is seeing 25% of the team’s air yards. If you are looking to add some WR depth that has WR2 production potential in any given week, then you could do worse than spending your mid-late 2024 3rd.
Investment: Greg Dulcich, TE DEN
Analyst (DLF Writer): Rob Willette
Age: 23
Draft Capital: 2022 Third Round
DLF ADP:
Discussion:
A trendy tight end breakout pick, Greg Dulcich’s season got negative in a hurry. He has played in only a pair of games and is currently serving his second stint on Injured Reserve, both a result of the hamstring injury he suffered in the opener. Also working against him is the fact he has never played for the New Orleans Saints, diminishing his value in the eyes of new head coach Sean Payton.
The confluence of factors listed above is pushing Dulcich down draft boards, yet they are the reason why he is being discussed in a penny stock article and not as an unimpeachable dynasty asset. Per DLF’s ADP, Greg Dulcich is going off the board 165th overall and at TE19, and those numbers could easily continue to drop as he misses more time. Dynasty managers have a short memory and Dulcich has now had both his seasons in the league truncated by injury.
Per DLF’s Trade Analyzer, Dulcich is often just being added as a throw-in, and commonly goes for a random third round pick. Dulcich worked his way onto the redraft radar as a rookie and tight ends take time to develop. If he can shake the injury bug, I would vastly prefer Dulcich to a random third round pick, which likely becomes a mystery box selection anyway (possibly even a tight end!). Dulcich will still be only 24 years old come 2024 and has a third-round pedigree. While Payton did not draft him, current GM George Paton did, so he at least ties to the regime. He could become a significant part of what figures to be a rebuilt Denver offense in 2024.
Investment: Sean Tucker, RB TB
Analyst (DLF Writer): Justin Taylor
Age: 22
Draft Capital: Undrafted
DLF ADP:
Discussion:
Sean Tucker was a high-end Devy prospect the past two seasons at Syracuse. Many scouts and fantasy football pundits had him in their top 5 RBs for the 2023 class. However, before the NFL Combine in Indianapolis, Tucker was diagnosed with an undisclosed heart condition and was not allowed to participate in the combine. Tucker was later not cleared for Syracuse’s Pro Day. He later held an individual workout, which he recorded and put online, but none of it was verified by the NFL.
It was expected that it would affect his draft capital. What was not figured in was his slipping in the draft from a possible day two player to surprisingly going undrafted. Tucker eventually found a home, signing as an undrafted free agent with the Tampa Bay Buccaneers. The 2023 NFL Draft saw 18 running backs come off the board. Tucker was not one of them. But I believe Tucker has more talent than many of them.
Prior to his health issues, Tucker was going as high as 113th overall on DLF in February. After going undrafted, Tucker dropped as low as 216 in June. He currently sits at an ADP of 152 on DLF and is ranked as the rookie RB 11 and overall rookie 33. To me, this shows a possible buy window for Tucker.
Tucker’s overall value has lowered due to him currently being stuck behind starter Rashaad White on the depth chart for the Buccaneers. But I am not giving up on Tucker. Do I think Tucker breaks out this season for Tampa Bay? No, not without an injury to White. Tucker is a more pure traditional starting RB than White, who has had some success this season, but overall has been a bit of a disappointment. Tucker could be a guy who surprises next year after another year in the system and more time to impress coaches. I would have no problem trading a 4th RD 2024 rookie draft pick for Tucker, and even as high as a late 3rd RD pick.
© Nathan Ray Seebeck-USA TODAY Sports
Investment: Jaleel McLaughlin, RB DEN
Analyst (DLF Writer): Jeff Smith
Age: 23
Draft Capital: Undrafted
DLF ADP:
Discussion:
Savvy dynasty managers have had their eyes on McLaughlin since early August when new Denver Broncos head coach Sean Payton compared him to the likes of Reggie Bush, Darren Sproles, and Alvin Kamara. The undrafted rookie performed so well in the preseason that the Broncos did not dare place him on waivers for fear that another team may claim him.
McLaughlin is the NCAA all-time leading rusher and a touchdown machine. The Youngstown State alum compiled nearly 4,000 scrimmage yards and 30 touchdowns across three seasons in Ohio. This does not even account for the 2,699 yards and 19 touchdowns scored his freshman year at Notre Dame College.
The rookie currently finds himself as part of a three-man backfield but is poised to outlast his teammates. Javonte Williams is coming off a significant injury and Samaje Perine is 28 years old. Denver can move on from either player with minimal cap ramifications and would actually save a few million by releasing them.
The current asking price appears to be an early third for the explosive back. If you have watched any Broncos football this season, you can see the juice he brings. He is a “Payton guy” through and through. You could certainly do worse with a third rounder.
Investment: Jalin Hyatt, WR NYG
Analyst (DLF Writer): Eric Hardter
Age: 22
Draft Capital: 2023 Third Round
DLF ADP:
Discussion:
Somewhere in the proximity of confirmation bias and victory lapping exists reasoned belief. Giants rookie Hyatt assuredly has not done enough to elicit either of the first two, but has flashed in a way that makes me think we are looking at substantial future growth. Despite being seventh on the team in targets and eighth in receptions, he is third in yardage. Averaging a robust 21.7 YPR will do that, along with enabling him to accumulate the second-most big plays on the team.
A Giants offense averaging a mere 6.0 YPA is not doing him any favors, but the coaching staff appears to expect a Week 8 performance that historians will deride as an emergency brake on aerial progress. Hyatt was starting to see the second-highest snap percentage among receivers. If Daniel Jones can return healthy and even remotely approximate his 2022 form, Hyatt has the potential to close the season strong and enter a bull market.
Investment: Trey Palmer, WR TB
Analyst (DLF Writer): Aaron St Denis
Age: 22
Draft Capital: 2023 Sixth Round
DLF ADP:
Discussion:
It was a slow start for Tampa Bay Buccaneers wide receiver Trey Palmer after being drafted with the 14th pick in Round 6 of the 2023 NFL Draft. Coming out of college at LSU and eventually Nebraska, he was seen as a very raw prospect with immense speed and talent. There was little optimism for his fantasy outlook as he joined a Buccaneers team that already had the likes of Mike Evans and Chris Godwin, and was about to begin life after Tom Brady.
Palmer entered his first training camp low in dynasty ADP as he was being drafted as WR100, right around pick 230 overall. He started the season off playing less than 50% of offensive snaps in each of his first two NFL games. As the season has progressed, and the Tampa Bay receivers have battled various injuries, he has seen his snap rate increase to at least 64% in each of the past four contests.
Heading into the Buccaneers’ Week five bye, Palmer had a season-high of three targets. Since the bye, he has recorded six or more targets in two out of three games. Palmer has yet to fully break out and is only beginning to show signs of life, but when you combine his rock-bottom acquisition cost with a roster full of aging and injury-plagued receivers, his second-half breakout could be just around the corner.
His speed gives him the potential to be an elite downfield threat. He has great deep-ball ability and could be Desean Jackson Lite. This is the cheapest his price tag is ever going to be. Scoop him up now, off the waiver wire in most leagues.
Investment: Demario Douglas, WR NE
Analyst (DLF Writer): Cody Mortensen
Age: 22
Draft Capital: 2023 Sixth Round
DLF ADP:
Discussion:
I have seen multiple headlines this week that read, “With the injury to Kendrick Bourne in week eight, Demario Douglas should have an expanded role for the Patriots.” Those writers have not been paying attention to the 5’ 8” Douglas. Since arriving in Foxborough, Pop has been standing out and had a steady drumbeat throughout camp. He then followed this up with barely playing in the preseason and had a similar workload to established veterans and entrenched starters. He then had seven targets with a 41% snap share in week one. Douglas appeared off to the races.
He followed this up in week two with two targets on the game’s first two drives. However, after his second catch, in typical rookie fashion, Douglas fumbled. After which, he was benched. From week two to week five, Douglas was in Belichick’s doghouse and averaged a 19% snap share. Until the putrid Patriots offense featured the dynamic rookie in week seven and he produced 74 yards on five touches and a 62% snap share. Then in week eight, Douglas had a 77% snap share and seven targets. I would expect his usage to continue at this rate for the remainder of the season.
The rookie has electric playmaking ability in the open field with 96th percentile burst score and 4.44 40-yard dash time. If your leaguemates are sleeping like the mainstream media, I would be willing to send any third round rookie pick for Douglas. Do not forget that we have seen the Patriots feature small weapons like Douglas before (i.e., Wes Welker, Danny Woodhead, Deion Branch).
© Eric Canha-USA TODAY Sports
Investment: Jake Ferguson, TE DAL
Analyst (DLF Writer): Peter Howard
Age: 24
Draft Capital: 2022 Fourth Round
DLF ADP:
Discussion:
Jake Ferguson is currently valued as a third round pick in the DLF trade calculator and has an October startup ADP of 119. I do not think anyone rostering him is going to be as willing to part with him as easily as that suggests, especially after he bounced back into the top ten in week eight. But it is worth mentioning because not everything that should be obvious is always recognized.
Ferguson has been doing this all season with 15% of the team’s routes and 14.7% of the team’s targets. He is in this sophomore season, as a rule, the deeper in dynasty ADP we go the more interested I am in both the running back and tight end position because that is where we find above-average points relative to ADP according to my research. Your league mates might have already forgotten that Dalton Schultz averaged 66 receptions and 670 yards in the last three seasons in Dallas.
Conclusion:
Overall, the players outlined above could be nothing or they could very well be something. Based upon the considerations outlined above, the DLF writers believe that they are worth the investment and gambling on. If you have late-round rookie picks and are looking to add depth to the bottom of your roster, these would be players that you could target, and over time could become fantasy producers and flex appeal.
“95% of penny stocks are junk. I show you how to find the other 5%”
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