Spotting a layup trade before everyone else

Marcus Padley says knowing when to buy shares isn’t about prediction – it’s about waiting in cash until a layup trade appears, then going hard.

The stock market’s so frantic, isn’t it? All-time highs one minute, collapsing the next. In order to make money, you’ve got to match the algorithmic, systematic, trend-following software and hedge funds. Ah, it’s just so hard. Well, actually, it’s not. There is a Warren Buffett method of investing that I use – and you can use it too. It’s very simple, and it’s what’s turned Warren Buffett into one of the richest investors in the world. And it’s nothing to do with hedge funds, algorithms, or systematic trading or charts. It’s called the fat pitch approach. If you’ve never heard of it, I’ll explain it. Let’s get into it. Your investing life is about to become a lot safer, simpler, and more enjoyable.

The science behind the fat pitch approach

There was a guy called Ted Williams. He played for the Boston Red Sox. He wrote a book in about 1970 about the science of hitting a baseball with a baseball bat. He broke up the square that they throw the ball into into 77 baseball-sized circles, and he put together the statistics of how well he hit each ball that came at him, depending on where it was in that box. Some of the 77 circles had good average hitting numbers. Others had terrible ones. His science of hitting was that you only hit balls arriving in the right spot – the spot you can hit. It’s called the fat pitch approach to baseball.

Warren Buffett took this idea and said the most fantastic thing about applying it to investing is that a baseball player is under pressure to hit – you only get three balls, and if you miss them, you’re out. But as an investor, you can sit and wait for days, months, even years before a ball turns up in the right spot to hit. So your investment journey doesn’t need to be frantic, reactionary, predictive, or active. It just needs to wait for the best investments to come along, and that takes all the pressure off the investor.

You have the option not to constantly try to hit balls arriving in the wrong spots. There’s a tendency for people who’ve decided to invest in the stock market to look for some way to make money every day. Even when the market’s trending down, the tide is against you, and things are difficult, people are still having a hit when all the balls are arriving in the difficult spots. You just need to wait until the tide is running in your favour, until the balls arrive in the right spot, and then give it a hit.

There are a couple of key elements to doing this. Warren Buffett reckons that if you had a punch card with 20 punches on it, and every time you made an investment decision you had to punch a hole in it – with only one card for your whole life – you’d think a lot harder before making an investment decision. If you adopt that approach, it completely changes the way you invest. You lose the frantic idea that you need to be doing things all the time.

If you listen to the newswires, to CNBC every day, to every commentator in the finance world – even financial advisers, especially brokers chasing commission – you’re going to be doing things all the time. You don’t need to do that. You need to wait until there’s a fat pitch.

But it’s not just about waiting for a fat pitch. What makes the difference is that when you get one, you hit, and you hit hard. In other words, when you get an easy trade – what I call a layup trade – rather than treating it as one of a number of trades and putting a little money on it hoping it goes well, you go hard. I know traders who do this: when they find a fat pitch trade, or a layup trade, they go with derivatives, they go big, and they make more money – more safely, too, because this is actually a much safer idea.

A layup trade in Qantas

So where do these ideas come from? You just wait for them. There was one just recently. It was after the Middle East peace deal on 23 March 2026, when Trump first backed away from war – first hedged his bets on war and started talking about a peace deal that Iran hadn’t even heard of. But the moment he started talking about it, the market became aware that the US was going to back away from the Middle East. The oil price was going to peak, and that’s what happened. The market went up again as inflation pressure and uncertainty evaporated, and off it went.

Now, what stock would you buy on a Middle East peace deal, after a Middle East war had smashed it? The most obvious stock was Qantas (ASX: QAN). It didn’t need to be a stock that had dropped 70% because of the war – Qantas had only dropped about 20% or so, and it came back 20% after the peace deal arrived, after Trump started talking about peace. That, I felt, was a layup trade. It was an obvious trade. It’s a travel stock. It’s hurt by a high oil price. It’s got the most to gain from the war ending. And it’s a big quality stock, too – too big to fail in the eyes of the government. It’s also trading on very solid-looking fundamentals. A layup trade. You just had to wait for it.

Where layup trades come from

Layup trades appear a lot when the market tops and bottoms. You don’t need to be playing stocks all the time. There are big pivot points in the market sometimes, and you’ve got to look out for those. When the narrative changes and the market bottoms – as it did at the bottom of COVID, as it did in November 2023 when the Federal Reserve changed its tune on interest rates, as it did when all the big tech stocks took off on the back of AI – these things create easy trades. That’s what you’ve got to look for, and you can wait for them.

I remember a broker I used to work with when I first arrived in Australia and went into broking – that was about 1994. He was an old hand, been around forever, knew everybody, had a bit of money. He put his young son onto our dealing desk and told him not to touch any buttons, but to ring him if a deal came up. He had this fat pitch approach – there are certain things when you’re a stockbroker, certain deals that come along, often share issues or IPOs, that you need to be sitting at your desk for, but you don’t need to be trying to do it every day. So he put his son, in his 20s, to sit at the desk, and when a deal came along, he had to ring his dad and say, “Dad, there’s something here which might interest you.”

I’ve seen this in real life, I use it myself, and I write about it in the newsletter. If we see a layup trade, we go pretty hard. We went pretty hard on Qantas in the Income and Growth Portfolios and made a good 15–20% in a couple of months with very little risk. That’s what we’re looking for.

The rules for finding a fat pitch

I’ve written an article about the fat pitch approach – there are a few rules to it. One is that if you can’t find a fat pitch, just hold cash. Cash is very powerful. It gives you options. Sitting in cash means you can objectively and unemotionally observe the whole market and just wait for something to turn up.

The other thing that fits nicely into this theory is that at any one time you should invest in the best investment in the whole world. That’s not going to be 20 stocks – it’s probably going to be one thing. It could be anything. It could be your career, it could be a house, or it could be a stock. But with this approach, it’s not a standard diversified portfolio – it’s a very focused approach. If you can find a fat pitch, by definition it’s got less risk. It’s got some decent fundamentals, it’s technically turning, and therefore you can go harder. It’s all about risk – if it’s less risky, you can go harder. That’s what you’re looking for: an easy trade, a layup trade, a fat pitch.

So, worth having a think. What are you doing? Have you got 20 stocks? Have you had some really good trades that you thought were actually easy in hindsight, but you only went small on? The rules are: be patient, be prepared to sit there and do nothing. That’s very hard to do when you’ve got all these buttons and charts in front of you. Don’t trade a lot. Only hold a few stocks. If you can’t find a fat pitch, hold cash. Respect the trend – don’t trade against the tide. Every trade is much easier when the market is running. Wait for the market to run. Things are easier when you’re swimming with the tide. And try to steer away from speculative stocks.

The idea here is that if you can make 10% out of Telstra (ASX: TLS) on an easy trade, that is so much better than trying to make 50% out of some bombed-out speculative stock. Fundamentals reduce risk. Look for decent fundamentals, a turning share price, an obvious reason – and just wait for that to appear. If you’ve only got 20 of these trades in your life, make sure it fits into one of them.

As Mae West said, you can’t have too much of a good thing. And in the stock market, you can go hard on a good thing. All you need every year is one good idea. One good idea makes a good year. Wait for the good idea. Do less and do better.

If you want a few good ideas, take a free 14-day trial of Marcus Today – we run a Growth Portfolio designed to capture fat pitch ideas, with plenty of stock ideas every day. If you’d rather leave it to us, take a look at MT20.