Archives for July 2018


Justify’s sweep of the American Triple Crown races in 2018 elevated him into the rarified company of twelve other colts.  One could debate—with no provable conclusion—how Justify measures up among the 13 Triple Crown champs in terms of ability.  While that question cannot be answered, the Triple Crown winners can be compared with surety on earnings.

Start with how each colt ranks on the metric of total career earnings.  In the first presentation below, the Triple Crown winners are rank ordered from most career earnings to least.  All earnings are stated in 2018 dollars.  Each colt’s number of career starts is also shown and then followed by the number of wins, places, and shows.

Citation (1948) 45 32 10 2 $11,525, 915
Whirlaway (1941) 60 32 15 9 $10,012,863
Affirmed (1978) 29 22 5 1 $9,636, 094
Assault (1946) 42 18 6 7 $9,337,371
American Pharoah (2015) 11 9 1 0 $9,636,094
Secretariat (1973) 21 16 3 1 $7,776,833
Seattle Slew (1977) 17 14 2 0 $5,198,307
War Admiral (1937) 26 21 3 1 $4,875,454
Gallant Fox (1930) 17 11 3 2 $4,828,209
Justify (2018) 6 6 0 0 $3,798,000
Count Fleet (1943) 21 16 4 1 $3,726,182
Omaha (1935) 22 9 7 2 $2,862,461
Sir Barton (1919) 31 13 6 5 $1,781,807

The next ranking depicts how much each colt earned per start (in 2018 dollars), which compensates for the vast difference in number of starts.  Whirlaway, for example, had the most career starts at 60 and Justify the least at six.

American Pharoah $848,376
Justify $633,000
Secretariat $370,325
Affirmed $332,279
Seattle Slew $305,783
Gallant Fox $284,012
Citation $256,131
Assault $222,318
War Admiral $187,517
Count Fleet $177,437
Whirlaway $166,881
Omaha $130,112
Sir Barton $57,478

Copyright © 2018 Horse Racing Business


About ten years ago, speakers at horse-racing business conferences would sometimes point to NASCAR as a model for horse racing to follow to increase its popularity.  According to them, the marketing gurus behind NASCAR had the right formula for attracting and keeping fans.

How times have changed.

For example, CNBC published an article on May 27, 2018 titled “The Rise and Fall of one of the Biggest Sports Leagues in the U.S.”  It said: “Americans have been swiftly falling out of love with NASCAR. The iconic US sports league has had an undeniably rough few years, from a rapid drop in TV ratings, to sponsor attrition.”

Then, on July 7, 2018, CNBC published a second article, by MacKenzie Sigalos, with the headline “Here’s What Went Wrong with NASCAR.”  An excerpt from the article reads:

[NASCAR’s] been losing TV viewers.  It’s having trouble filling the stands, even after losing tens of thousands of seats from its stadiums.  And perhaps most worrisome of all, it’s losing sponsors, and those that remain are paying less than they used to.”

The author attributes NASCAR’s decline in some measure to “straying from the brand.”

“It’s partly to do with the fact that it’s alienated its core stock car racing fan.  In a bid to attract a new kind of audience, NASCAR moved into trendier markets in the ’90s.  NASCAR built superspeedways in Las Vegas and Southern California–and shut down some classic venues in America’s southern states.  But the move to be nimble with the brand backfired.  The new crowds didn’t convert into the die-hard loyalists that the sport needed.  Former NASCAR executive Ramsey Poston says the league was trying to enter new markets without the Southern stigma–a move that he calls a mistake.”

NASCAR’s misguided marketing strategy has a significant lesson for racetrack executives.  In brief: “Don’t alienate your core supporters.”  While it is certainly imperative for horse racing to cultivate fans for the future, too much emphasis on this approach can lead to the unintended consequence of not catering enough to its most valuable customers.  Horse racing’s revenues and profits derive from people placing bets and the vast majority of pari-mutuel handle comes from a relatively small proportion of bettors.

NASCAR mistakenly tried to escape its “Southern stigma” and horse racing sometimes attempts to downplay its gambling roots.

Copyright © 2018 Horse Racing Business



Churchill Downs, Inc. (CDI) is a key player in retail horse racing, especially because of its ownership of the American sport’s crown jewel, the Kentucky Derby.  Howard Klein, a perceptive and respected gaming/leisure analyst and publisher of the casino investment site The House Edge evaluated CDI for Seeking Alpha on June 27, 2018.  In that report, he compared CDI to Las Vegas Sands as an investment opportunity.  He said about CDI:  “To properly value the stock, you need to see it not as a gaming operator but as something of an iconic racetrack event linked to an internal hedge fund.”

Klein is candid:

“Readers…have long known that I have never been a fan of the stock of Churchill Downs, Inc.  To be precise I am not fan of the stock, but generally like the company.  CDI is a solid, decently run, diverse entrant in the gaming sector.  Better than some, less so than others… My concern in past posts as well as in this one is my continuing puzzlement that given the asset base, performance, and forward potential, the stock trades at around $300 a share.”

Klein cites familiar metrics and trends to explain his reasoning for stating that CDI stock is overvalued:

CDI’s racetrack “segment produced $276m in revenue, or approximately 31% of total 2017 revenue. The iconic Kentucky Derby is a superb event with a great history, but it alone cannot reverse the negative demographic trend of live racing attendance and handle declines going on for decades now.  Firstly, the average age of a racetrack bettor is 51 years.  And according to a Jockey Club study, the industry is losing 2% of its fans a year to the glum actuarial realities.”

Klein’s most intriguing and thought-provoking narrative concerns CDI’s sale of its Big Fish subsidiary for $990 million in December 2017, ostensibly so CDI could focus on core assets in racing and casinos.  He referred to the sale as “sudden” and “shocking” to some followers of CDI.  According to Klein’s unnamed sources, the main motive for the sale was to raise cash to buy back stock, reportedly because “CDI had caught wind of an activist investor who had acquired somewhat less than 5% of its stock with the strategy of instituting a battle for control and, upon a win, unload the crown jewel asset, Churchill Downs and the Kentucky Derby event, for an estimated $2b.”

CDI is not the kind of situation an activist would typically target in that the company has produced outstanding returns for its shareholders, with its stock price soaring by nearly 65% in the past year.  Only if the stock price faltered badly would activists be enticed to buy more stock and demand one or more seats on the board of directors, and perhaps even control (about 75% of CDI stock is owned by institutions).

In closing, the view here is that because CDI’s businesses are confined to gambling-centric entertainment, the company does not at all resemble how a hedge fund operates.  Klein makes a persuasive case that CDI stock is overvalued, but so is the entire stock market if the Shiller historical P/E ratio is the benchmark.

Copyright © 2018 Horse Racing Business