Wednesday, April 6, 2011

A pricey bunch of 'average' horses

While selecting 187 juvenile racing prospects from a few of last year's thoroughbred auctions, I also took time to critique the purchase -- or purchase-prices, anyway -- of a handful of horses from two of those sales.

Eight horses made my "surreal" list from Keeneland's April sale, an auction in which I labeled certain other purchases the "steals" of the sale, and recommended a third list of prospects that went unsold as animals which might be purchased privately, or could turn up in a future sale and should be considered at that time. The ninth horse I panned was the lone "de-tip" I made from Ocala's huge April sale of 2-year-olds in training.

So far, my doubts have proved fairly well-placed.

On the whole, the nine horses have as of this date made 21 lifetime starts. And five are already winners, of a combined six races. But class considered, that's almost where the good news ends.

First, let's give credit where it's due to the more promising horses of this group.

Malicia, a chestnut filly by Tapit-Malia, by Regal Classic, was the cheapest of the 10 horses whose purchase prices I criticized, selling for $110,000. And my criticism of buyer Prime Equestrian in this case (but not in other cases, as you'll see) was appropriately muted. I noted that she sold for much less than the average price of a Tapit filly at that point last year ($239,375), which was a good thing, but that her female family's racetrack history was pretty hit-and-miss, and I simply would have balked at paying $110K for her. ... She promptly was sent to France and won twice in as many starts at age 2, earning $35,954. She is yet to race at 3.

And, Akkadian, a strapping dark bay colt by Tiznow who sold as Hip 86 at KEEAPR to Gary S. Broad, has worked like a champ and collected a win and a place from three starts, for $46,560. He looks like he could be a very promising racehorse, though the $270,000 purchase price at the sale could still be a little difficult to earn back. It seemed too much at the time (and perhaps still does) for a colt whose nearest graded stakes-winner on the catalog page was under his fourth dam.

It just gets ugly from there.

The group does boast three more winners, but all could be considered disappointments by their connections. Harsher critics would call them busts.

Hip 120 at KEEAPR was a horse from the "surreal" list that actually didn't sell. I was surprised that $340,000 was offered for a colt -- later named Isaac Newton -- whose equal I thought could be purchased for a small fraction of the price. But I was simply aghast that the seller, McKathan Bros., agent, didn't take it. ... On March 2 this year, in his second career start, the Bernstein colt broke maiden by a half-length at Gulfstream. For a $35,000 tag. And went unclaimed. He has earned $11,572.

Three lots later, at Hip 123, Padua Stables signed the $350,000 ticket for a colt later named Jaeger, sired by Indian Charlie and out of the Valid Wager mare, The Church Lady. He was fleet, with a 10-flat eighth. And his page had plenty of winners. But those winners and most stakes performers were largely at second-tier Canadian tracks like Northlands Park and Hastings Park (i.e., not top-notch Woodbine). The price seemed far too high for a horse . And, it has proven to be so. On March 5 at Laurel Park, Jaeger broke maiden among special weights in his fourth lifetime start. Exactly three weeks later, he was sixth beaten 11 3/4 in a $40K optional-claimer in which he wasn't risked for the tag. Jaeger has earned-back $28,420 of that $350,000 ticket. And that can't be what Padua Stables had hoped.

And, the fifth winner is Malibu Star, who has earned six figures already while racing in Japan. How can that be disappointing? ... Well, because buyer Katsumi Yoshida paid the second-highest price of the Keeneland April sale for this Malibu Moon colt, a cool $575,000. So a win and two unplaced efforts from three starts, earning $100,170 in the Land of the Rising Purse (where third-rate horses can be six-digit earners), has to be less than Mr. Yoshida had expected.

While it's true that plenty of time remains for any of those horses to elevate their stock dramatically -- it's just early April of their 3-year-old seasons -- the remaining four have to look like even worse investments.

Prime Equestrian dropped $310,000 apiece at KEEAPR for a Birdstone colt later named Prime Opportunist and a Rockport Harbor colt who became known as Billy Smart. That $620,000 investment and training bills since have resulted in four starts and $940 banked between the two, although I suspect both will eventually win. At some level.

"Mr. & Mrs. Moss & Diamond Pride" plunked down $200,000 for a Bernstein filly who breezed well at KEEAPR and who has a little bit of family. But I was skeptical of her chances in part because I think her sire is somewhat overrated. The filly now named J T Safe at Home has yet to make a start.

And in my lone Ocala April "pan," a High Fly filly later named Frothy Market set the under-tack show ablaze with a 9 3/5 clocking for an eighth-mile. I knew that would grossly inflate her value, far above and beyond the worth of a filly who is by a sire that so far has done virtually nothing, and out of a dam who had only raced once. She ran a fairly dull race on dirt for Klaravich Stables and W.H. Lawrence, and while she perked up a bit when given a turf try recently, Frothy Market is unplaced from two starts for $1,996.

So, about a year into their collective careers, my nine criticized juveniles of 2010 managed to cost (or RNA for) a combined $2.64 million, and have earned back $225,612, most of that by three horses.

And while I might yet be proven wrong by a horse or two, on the whole, it appears this group is just as average as I thought they'd be, despite high prices that are anything but.

Follow these nine -- and the 187 horses I did like, who were almost universally cheaper and as a group are doing undeniably better -- at this link.


  1. Great info Glenn-

    Buying at auction is a suckers game, as you will continue to detail in this space. At best: ROI of 20% will be the norm when all is said and done on your bunch of 187.

    Very non scientifically, I looked at some available data on the Barrett's sales over the past decade - and in many cases the RNA'd stock outperformed the fastest workers on the track later in their careers.

    Even the very top 'name' buyers/horsemen will fail to bat .200 over time. Similarly, the new school heart size and/or biomechanics camps will do the same.

  2. Right now, it could be argued that any ownership aspect of the thoroughbred business is "a sucker's game." I can attest that breeding your own isn't the easiest row to hoe, either. Nor least expensive. You can spend tens of thousands on a horse who would never sell for that, and then cross your fingers and hope he earns it back if you run him yourself.

    Meanwhile, you can buy useful horses for $10K to $40K -- after someone else has paid the stud fee, the mare care, and taken all the risk getting them to age 2 -- then take them to the track and make out OK.

    As for the group of 187, are you suggesting 20 percent will run out well enough to justify their purchase price? Or that they'll only earn back 20 percent of what was spent on the group? ... Are you including training costs in that equation?

    I noted on this blog that Glenye Cain in her book "The Home Run Horse" reported that only a small fraction of yearling agents/buyers -- and that percentage you cite for ROI (20 percent), from memory, seems about right for the batting average of even the most well known (and thus wealthiest) agents. Only 1 in 4 or 1 in 5 -- had a positive ROI at the racetrack over the course of time. And I'm sure she wasn't including the ongoing costs of breaking, training and campaigning the horse after purchase, which would make those figures even more stark.

    Of course, the racetrack is only part of the equation. If you spend $100 million on 200 horses, earn back $25 million at the track, then syndicate four stallions out of that group for a combined $80 million, plus sell a bunch of mares at auction, etc., it can still pan out as a positive financially. The residual value does make a difference. But few people can afford to play the game on those terms.

    Because I focused my list primarily on horses that I thought would be useful (or better) from those who would sell for average prices (or usually much less), I expect to do better than that regarding ROI at the racetrack. And it is what I would pledge to any client: I believe I can do at least as well as their racing stables have ever done at the track, at half or less the prices they've been spending.

    While a number of "my" 187 were withdrawn at their respective sales, and thus no bid was made on them, from memory the total amount bid on the 187 that did either sell or RNA was about $6.2 million. Thus far, in early April of their 3-year-old campaigns, as a group they've earned back roughly $4.3 million of that. (No small thanks to Gourmet Dinner's banking nearly $1 million on his own, but bidding stopped on that horse at $40K at OBSAPR, so I think he's a good endorsement for me.)

    In the horse racing game, you're always going to lose on some, whether you're an owner or a bettor. The key is to win (earn) more often than you lose, or at least win big enough when you do win to more than cover your losses.

    I was just thinking about this as I got ready for work this morning, before I noticed your comment, and I likened my strategy to that of the contact hitter in baseball vs. the power hitter. The slugger hits some breathtaking home runs and gets a lot of glory, but he also strikes out far more often. The singles and doubles guy still whacks a home run now and then, and his club benefits from his consistency.

    Most kids grow up wanting to be the long-ball hitter. But Tony Gwynn is in the Hall of Fame, too.

  3. My 20% figure is a simple one: based on racetrack earnings vs purchase price - I don't factor in training/vet costs nor do I factor in residual value at stud - 2 big factors on either side of the equation.

    What I find frustrating is today's buyer is seemingly happy to lose money while searching for the Home Run Horse. For every Mike Repole there are 10+ other millionaires who's money will disappear from the game after a few poor years.

    Sounds like out of your 187 the RNA'd stock is doing better as a group than the others, I find this quite interesting (not sure why).

  4. I agree with you completely in your astonishment at the number of wealthy individuals who are perfectly willing to throw good money away on seeking the home run horse. Many do get frustrated and get out. Others go broke while they keep trying. Or have deep enough pockets to fail, fail, fail, then finally (maybe) get it right once and convince themselves that the one horse who was a hit is evidence that they were going about it right all along.

    My thought on a lot of the RNA horses is that in many cases the breeder (or in some cases pinhooker) had a longer relationship with the animal and a more intimate knowledge of the animal's true worth than a buyer who saw him breeze once, stand/walk outside a stall a time or two, and who potentially is trying to "steal" the horse out of the sale. ... OR, in some cases, the RNA is set very high because the seller is content to keep a promising horse unless he gets a large bid at auction ("large" being relative) that he would find impossible to turn down. ... Occasionally, consigners might have had no intent of selling and thus set an unrealistically high reserve, but by at least running the horse through the auction ring, it qualifies for sales stakes like the OBS races run recently, the TTA Sales Futurity, etc. ... Those are my thoughts about why some of the RNAs turn out to be better than horses that bidders saw fit (and bid high enough) to buy.

    As for the RNAs among my 187, some of them are doing well, particularly the cheaper RNAs whose value was simply not recognized by the majority of bidders. BUT, some of the sales horses have done well, to. Rigoletta (now retired with injury) sold for $35,000 and was a G1 winner at 2. Rough Sailing was a $40K buy at EASMAY and I thought stood a chance of figuring in the Breeders' Cup Juvenile Turf, in which he lost his footing on slick turf entering the first turn, fell, and had to be euthanized. (Two success-turned-hard-luck stories from my list.) Gourmet Dinner was officially a $40,000 sales purchase, but his co-breeder bought the horse from OBSAPR for that price, so in effect half of that money was returned to him. ... So that's three horses who DID sell off my list of 187, none for more than $40K, who became graded-stakes-placers/winners.

    Finally, one of the above list of busts, Isaac Newton, runs in about 10 minutes at Gulfstream: 4/1 second choice in a $50K starter allowance. We'll see how he does.


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