Updated: Jun 4, 2020
There's a sweet spot on the index - we're not exactly sure why or how it works. It certainly takes a while to find it, and it often can't be found when you actively look for it.
But when we breakdown Diogo Jota's contributions this season, we were pleasantly surprised at the value for money. He ticks a lot of boxes, but sits way down in the Top 200.
Many traders love the superstars for big dividend returns, both in PB and media attention. The lottery of wonderkids offers the other end of the spectrum. With little performance data to go on, and only speculative media attention, they don't yield great dividends (yet) but offer the opportunity to return three-figure % increases over the period of investment.
However, both established superstars and hyped-wonderkids present a risk. They cost more to invest in, so have a bigger pedestal to fall from. They offer higher reward, but higher risk.
Somewhere between wonderkid and superstar you'll find a vast array of talents that cost no more than £2.50 on the index. Amongst these, you'll find players that tick a lot of boxes for index traders.
- 23 years old
- Winger, Second Striker, or Striker
- Top 6 Premier League Side
- Portuguese National Team
Jota is one such example of box-tickers. At 23, he's outgrown the wonderkid mould. His time at Porto and Atletico Madrid shaped his way to the Premier League. Having played at Wolves since their Championship-winning season in 17/18, he's posted respectable numbers in the Top Flight of English Football. Outside of Index-thinking, a 23 year old is young. There's a lot of room for growth when you're playing Premier League, and potentially European football, for seasons to come.
We've presumably not seen the best in Jota just yet.
One crucial box that Jota ticks is the Portuguese National Team. In a star-studded squad of European elites, Jota earned his first two caps for the senior team during Euro 2020 qualifiers. In his U21 days, Jota scored 8 in 20 appearances. It's fair to say he's recognised in Portugal.
Transfers are always a source of activity on the Football Stockmarket. Jota was linked to a move BACK to Atletico Madrid for a rumoured £30M in March, but Wolves showed no interest in letting the winger go, despite the depth in emerging talents such as Neto and new signing Daniel Podence. Speculation around joining a team outside of Europe doesn't fare well on the index unless it's to a Superclub. Atletico, whether you rate them or not, have knocked out European Champions Liverpool this season in the UCL and have featured in the competition for the last 6 years. They are, on-paper, a bigger and better side than Wolves are (for now...). It's also worth baring in mind Jota is a client of Gestifute, a super-agency who will unlikely support any transfer that won't see Jota rise to the European elite.
Back to the player - we have a young winger playing International, European and Premier League Football. But what would drive somebody to invest in a player that is not heavily linked to a super club, not a wonderkid anymore, not a champions league player, not posting brilliant league stats and is not exactly cheap at £2.47?
1. A low risk opportunity.
2. Performance Dividends.
The first part, low risk, has a lot to say for the prospective investment.
From the club perspective, Wolves have been fantastic to watch, both in the PL and Europa League. They have experienced players in Moutinho and Jimenez at the peak of their career. First-teamers such as Adama, Jonny and Neves are emerging as outstanding talents. Depth in youngsters such as Neto, Gibbs-White and Vinagre. An excellent manager and coaching staff. The Wolves rebuild is in full-swing and it's difficult to imagine they'll be slipping up in seasons to come. Arsenal and Spurs have far more leg-work to achieve a Top 4 spot compared to Wolves. Wolves finished 7th last season and are now in the last-16 in Europa. They currently sit 6th in the league, so European Football is on the agenda for the foreseeable future.
From an individual perspective, Jota looks low-risk on the basis of all the boxes he ticks. His price has increased by approximately £1 in the last 12 months, and has stabilised just under £2.50. He plays regularly and there are few indications of volatility such as injury or transfer that will see his price decrease. In the league, he's posted 6 goals and an assist in 25 games this season. This is clearly not setting the world alight, but offers a clear path upwards, fewer goals and assists looks highly unlikely in coming seasons. So we don't see a price decrease.
The second part in our argument for investing in Jota is his performance dividend yield. What we consider the 'real value' here is that Jota actually offers PB dividends right now...(well, when football was being played!).
This season, his 6 goals in 6 appearances in the Europa League saw him win two Gold Match Day Top Forwards and One Star Player.
That's £0.24 in PB this season. Highly respectable for a 23 year old. Trent Alexander-Arnold is the only player younger than Jota to have won more PB dividends this season.
Despite having a PB average of just 76 over the last 12 months, the last 3 months he's averaged 155. Jota has flashes of brilliance. His PB high of 257 demonstrates this. The ultimate attraction here is that for as long as Jota is playing, and Wolves are playing in the Europa League, the PB potential of the Portuguese winger is only looking as though it's going to increase.
Diogo Jota doesn't have to become a global superstar to be a profitable investment. Yes, there are plenty of indications that he WILL become a fantastic player - his value will likely increase in the next three years if he continues to ply his trade on the wings at The Molineux. But even if he stays at Wolves, and Wolves stay in the Europa League for the next few seasons, Jota will pay dividends without losing value. The Europa League is where Jota is thriving on Gold Match Days. His quality may not be better than the Champions League wingers just yet, but he's proving to be significantly better than the Europa League defences he encounters.
Over a three year period, Jota offers an opportunity to win dividends without the volatility of highly traded players. It's a patient investment for traders who don't just want quick profit, or monitoring of transfer rumours at every lunch-break.
Here's a run-down to justify, for yourself, if you'd consider Jota a safe investment:
1. Do you see Wolves dropping below Europa qualifications in the coming two years?
- Arsenal, Tottenham, Everton or even Newcastle are most likely to rise in their rebuilds...
2. Do you see Jota being dropped from Wolves match-day squad?
- Injury? Fall out? Neto or Podence to exceed his form? Not impossible.
3. Do you see Jota moving to a less successful club?
- A rogue move for more money? Unlikely at his age. Who has more money and less success than Wolves right now?
You're well within your right to think Wolves COULD slip up. Answering yes to any of those questions may raise an alarm bell for an investment at £2.50 per share. We're not here to tell you to go and invest in Jota, rather pose some questions that would help you consider why he'd be a good investment.
With an increasing number of traders joining the index every week, do you see his value dropping over the course of three years? Do you see him winning dividends again in the Europa League? Do you see his PB average increasing?
Perhaps that's enough to suggest he's safe to invest in right now. Not the most lucrative investment. Not the quickest to provide returns. Not a hype. But relatively safe, value for money. If that type of investment is on your agenda, he's well worth doing your own research on.