July 2, 2014

Fantasy Freestyle

Minor League Draft Pick Valuation

by Jeff Quinton

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Many a keeper league has a minor league draft to supplement the major league draft or auction; the trading of minor league draft picks is fairly common practice in these leagues. Often serving as the final pieces to help balance a trade, the value of these picks can range from incredibly valuable to having almost no value depending on the structure and rules of the league. Proper valuation of minor league draft picks is thus critical when making a trade that includes these draft picks. Today we look at several key factors to take into account when trading away or trading for draft picks. By looking at these factors, I mean that there are typed words on them below:

Number of minor league slots in the league (Minor League Depth)
The more minor league keeper spots in a league, the less valuable the picks become. All other variables made equal, the minor league picks in a 16-team league with four minor leaguers per team are more valuable than the picks in a 16-team league with five minor leaguers per team. Why? Because, in theory, the top 64 (16x4) fantasy prospects would be owned in the first league, whereas the top 80 (16x5) prospects would be owned in the second league. Therefore, come next year’s minor league drafts, more top prospects would be available in the first league than the second league. Also, prospects that make significant improvements—the ones that jump up real and fantasy lists—are less likely to be owned in the first league than the second league. What are not different between the two leagues, generally, are the top prospects available from the most recent MLB minor league draft. Because prospects from the most recent MLB minor league draft are usually the best players for our fantasy minor league drafts (with the exception being the previously mentioned un-owned players that have made large strides), the first handful of picks in minor league drafts will be the same regardless of minor league depth. The true difference in value of minor league draft picks, as determined by minor league depth, is thus the value of the picks that follow these top picks from the MLB minor league draft. In leagues with shallow minor league depth, a bottom first round pick will probably be a top-50 fantasy prospect. In leagues with deep minor league depth, a bottom first round pick might not be a top 100 fantasy prospect.

The next question becomes, does the decreased value of later picks increase the value of earlier picks? In other words, was the first pick in an NL only keeper last year, which would net you Kris Bryant, more valuable in a league with shallow minor league depth where the 12th pick would net you Arismendy Alcantara or a deeper league where the 12th pick would net you Edwin Escobar, or is there no difference at all? My thought is that picks that capture impact talent in the deeper leagues are more valuable because there are fewer picks that capture such talent (equal-ish demand, less supply), whereas there are usually going to be more impact picks available in shallower leagues where there is a greater supply of impact picks.

I have used usually and generally a few times and that is because the true value of a pick is going to really come down to the actual players available, and that brings us to our next factor.

Players available in the minor league draft
This is the most obvious factor and it is also the factor that fluctuates the most season to season. The top draft picks are more valuable in a season where Byron Buxton, Carlos Correa, Addison Russell, and Kevin Gausman are the top prospects available than in a season where the top prospects available are Mark Appel, Clint Frazier, Rougned Odor, and Alex Meyer. The deeper the league the more this factor is dictated by the previous season’s draft class. In order to know the value of the available prospects in order to know the value of a specific pick or range of picks, we must know the talent pool. The obvious parts are looking at the fantasy impact of the most recent draft class (Bret’s Top 50 article) and the most highly ranked, undrafted players from the preseason’s rankings. The less obvious part is making sure to keep tabs on the risings and fallings of minor leaguers since the rankings were published. An example in bullet form on all the different factors below:

• After the previous minor league draft, the top 50 minor league prospects were owned
• 20 of those players have entered or most likely will enter the major leagues and will no longer be minor league eligible (30 of the top 50 remaining)
• 10 of the minor leaguers being kept have seen their prospect status fall, putting them towards the 75 to 125 range for fantasy prospects
• Five un-owned prospects have seen their prospect status grow greatly, putting them in the 15 to 25 range for fantasy prospects
• Five to 10 players from the MLB minor league draft figure to be in the top-50 fantasy prospect range by the start of next season (the time of the minor league draft)

The net result of all of these should help you come up with a rough sketch of the players available in your next minor league draft. Midseason rankings will help in the tracking of all these changes, but if you are going to be taking advantage of information asymmetry (where you know more than your trade partner or, in this case, you can value these picks more accurately) then you may have to make these moves before the lists come out. Even when the lists do come out, some owners will anchor on previous valuations, wanting to keep their minor leaguers that are no longer the prospects they once were, and it as this point that we might be able to acquire a pick below its actual value.

While the players available are the main component in minor league draft picks valuation, there are some additional factors that we should be taking into account. Those factors follow:

Keeper Structure
Again, this is obvious, but the rules around minor leaguer keeper eligibility will dictate the value of picks. The longer and more cost effectively minor leaguers can be kept the more valuable the pick. This is a small point, but worth noting. If you are going to have to somewhat expensively own a minor leaguer (once activated) only to release him during his peak years, you might be better off trading for active players. Or, in shallower leagues, if recently called up, pre-peak prospects are going to take up valuable bench spots; you also might be better off trading for different assets.

Major League Depth
This factor applies to both picks and prospects valuation for fantasy baseball. The shallower the league, the more impactful a prospect need be in order to be useful. Depending on the minor leaguers available (largely dependent on minor league depth), the minor league picks may be close to worthless if these players will most likely fail to reach the talent available in the major league free agent pool. When I say “close to worthless,” I am coming from the “never providing production for your major league squad” angle. Of course, depending on your league, these players may have trade value even if they lack practical value. This brings us to our final and potentially most important factor: league norms for minor league picks and prospects.

League norms for minor league picks and prospects
Our league norms surrounding the value of prospects will ultimately dictate whether we should be trading for minor league draft picks and which picks we should be trading for. In theory, the value of a pick or prospect in the market should match the actual value that the prospect will provide (the asset’s net present value). However, this is usually not the case. Minor league draft pick valuation norms vary from league to league and owner to owner. In leagues where picks are overvalued, we want to sell picks. In leagues where picks are undervalued, we want to buy picks. The same goes for owners who either overvalue or undervalue picks. If we can identify these asymmetries there are occasionally profits to be had. The key here is keeping your finger on the pulse of the league and individual owners, as these norms will often fluctuate.

The above contained a lot of discussion, but no solutions. Given that each league and each owner is unique, hard solutions would be useless and potentially reckless. The hope is that this helps us to think about the minor league draft pick valuation more critically, and that in doing so we can improve our valuation process going forward. Hopefully everyone was already considering these factors, but I know, at least for me, when I am caught up in trade negotiation, I have not always done my due diligence on the minor league draft pick valuation end. Good luck as we enter the height of trading season.

Jeff Quinton is an author of Baseball Prospectus. Follow @jjq01
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