Tuesday, May 27, 2008

Unique Opportunity

I think there are two approaches that can be profitable in any type of speculation, whether it's as a thoroughbred owner, stock market investor, or gambler. My usual preference (and the approach my Thoroughmetrics business uses) is look for confirmed 'edges' that can be applied many times, leading to a virtual certainty of long term profit. This requires situations that come up often enough that statistically valid back-testing can be done to test theories, and that the edge can be applied frequently enough in the future to be worth something.

The other approach is to be opportunistic, and wait until a unique situation presents itself that has so many factors in its favor, that your experience and intuition tell you that you have an immense edge. These situations can't be statistically validated, because they occur so infrequently, and each one is relatively unique. The key to these is to be patient and impartial when evaluating them. You should also be able to articulate in clear and specific terms your reasons for thinking that they represent a profitable opportunity...otherwise it's likely that you're fooling yourself, and just WANT to find such an opportunity.

I believe that there's a chance that one of these opportunities may present itself in the Belmont Stakes this year.

Most people seem to expect Big Brown to go off as about a 1-5 favorite. I think most would agree that he actually deserves to be somewhere around a 1-2 favorite. He's beaten most of his opponents, won at a longer distance than any of them, he's unbeaten, run faster Beyers than his opponents, and run a much faster Ragozin than any of them. While there are several good horses in the race, none of them are proven stars yet. His strongest opponent (Casino Drive) has only raced twice, and won a Grade 2 race by 5 lengths with a Beyer of 101. He has never run longer than a mile and an eighths. Yes, he looked good in the Peter Pan, yes his pedigree suggests he should love the distance of the Belmont, and yes Bernardini had similar credentials before the 2006 Preakness...but I believe that fair odds on him would be around 5-1. His next strongest opponent (Denis of Cork) finished around 10 lengths back in the Kentucky Derby. Yes, he made a big comeback from last place in that race, but that running style tends to be overrated for the Belmont Stakes. He also probably deserves to be about 5-1 or 6-1. Assuming everyone elses odds should be substantially higher, I believe 1-2 is about right for Big Brown.

So is the opportunity I'm looking at to bet against Big Brown, since people expect him to be at far lower odds?

I don't think so. I believe there's a chance that he may go off at much higher odds than expected. Possibly even money or worse. Here's why:

1. The Japanese have showed up in large numbers for overseas races in the past, and bet their horses down to ridiculously low odds. I'm not sure that will happen for Casino Drive since he wasn't an established star in Japan, but if it does happen it could have a huge impact on the betting.

2. Many pedigree geeks seem to be overrating the influence of Casino Drive's pedigree. Yes, he almost certainly can handle the mile and a half distance of the Belmont, but there's not some mystical ability that Better Than Honour has passed on to her children to automatically win the race.

3. The ten previous failures since the last Triple Crown winner seem to have convinced a lot of people that it's become almost impossible. Instead of understanding that the near misses by horses like Real Quiet and Silver Charm showed that it CAN still be done, people are interpreting the bad luck and near misses as showing that it CAN'T, and some people will bet against Big Brown simply because of this.

4. Big Brown's quarter cracks are going to scare off some more potential support at the windows, despite the fact that many horses have run with worse, with little or no impact on their performance.

In summary, I think there's a real possibility that Big Brown could go off at around even money or slightly higher. And if so, I think it's a fabulous opportunity to back a likely winner at generous odds.


MasterRay said...

I think you have good, sound reasons for betting Big Brown to win but you won't see the generous odds you envision. He likely will go off at 2/5, even as low as 1/5. I think the best way to bet him is to place. Tons of money likely will be bet on Casino Drive to place and he will be passed in the upper stretch by other horses and win up off the board. Check the mutuals in the Preakness.

steve in nc said...

I like your reasoning and I love Big Brown. But I want a bigger edge to get involved -- something like 2-1, which will never happen. I got my last 2-1 on him in the Derby.

Thanks for posting that link to the Casino Drive debut race over on Left At the Gate. Nice horse. More reason to just watch this one and enjoy.

Winston said...

The only issue with the Kelly criterion is that you have to have demonstrated your edge.
This is of course in hindsight but breeding and missed training due to the quarter crack significantly played a role in his loss. Fair odds on BB should have been somewhere near 7/5.