2004 Preakness Stakes Preview

 

The 2004 Preakness Stakes should be interesting.  The obvious story is the undefeated Kentucky Derby winner Smarty Jones (7 for 7) attempting to become the first Triple Crown winner since Affirmed in 1978.  This would require winning both Saturday’s Preakness and the Belmont Stakes on June 5^th.  With a biography that rivals “Seabiscuit” for charm and improbability, Smarty Jones emerged from modest breeding and a second rate racetrack to become, with a journeyman jockey, the first Kentucky Derby winner on the cover of Sports Illustrated in 20 years.  Will he gain his place in racing history alongside Secretariat, Affirmed, and nine other Triple Crown winners, or be the latest casualty of horseracing’s most difficult test?  

 

A quick look at the players (in order of morning line odds):

 

Smarty Jones (8/5, 1^st in Kentucky Derby):  As mentioned above, from modest beginning to 7 for 7 winner of Derby.  Had perfect “trip” in Derby and won convincingly.  Logical favorite.

 

Lion Heart (3/1, 2^nd in Derby):  One-dimensional “early speed” horse.  Only chance is to lead race from gate-to-wire.  Led Derby into the stretch before being passed by Smarty Jones.  Similarly, was caught near wire (and finished a clear second) in his two other 2004 starts (by Imperialism and The Cliff’s Edge).

 

Imperialism (5/1, 3^rd in Derby):  Like Smarty Jones, arguably another “overachiever.”  His level of experience (16 career races) is highly unusual for a top horse at such a young age.  One-dimensional “closer” who will have to come from far back.

 

Rock Hard Ten (6/1, Unraced in Derby):  Top breeding, deep pocket owners, and very impressive and imposing physical specimen.  The supermodel of thoroughbreds.  Only three career races.  Held out of Derby due to lack of earnings.

 

The Cliff’s Edge (8-1, 5^th in Derby):  Came back from ride in Derby missing two shoes and walking gingerly.  Seen limping around paddock as recently as Thursday.  Likely to be scratched on Friday. Despite decent qualifications will eliminate from discussion on basis of health.

 

Eddington (8/1, Unraced in Derby):  Similar to Rock Hard Ten.  Top connections (including world’s best big race rider in Jerry Bailey).  Also missed Derby due to earnings qualification.  Barn has high hopes and cites potential. Critics note only two wins (and no stakes wins) in six tries.

 

Borrego (15/1, 10^th in Derby): Another come-from-behind “closer.”  Three 2nds in graded stakes this year before Derby.  Obviously didn’t like mud at Churchill and supporters will point to that race as an anomaly.  Critics will cite that he has failed in four softer spots.  Why now?

 

Song of the Sword (30/1, 11^th in Derby):  Troubled “trips” in all three stakes efforts. Hasn’t beaten anybody of note, but has had excuses.

 

Sir Shackleton (30/1, Unraced in Derby): Interesting addition since, at the very least, he will give Lion Heart company on the lead and will force the early pace.  Three solid wins in recent races at shorter distances.  If he can get the extra 3/16 of a mile (a big “if”), could be around at finish at a big price.

 

Water Cannon (30/1, Unraced in Derby): Wants to be on/near lead, but numbers say he can’t run with Lion Heart.  He is the token “local horse” entrant.  Will get some play on exotic tickets with big 2^nd place effort of local long shot (Magic Weisner 2002, 45/1) still fresh in memory.  Has won last five in a row, but versus much slower competition.  I’d be very surprised if he was a factor.

 

Little Matth Man (50-1, Unraced in Derby):  Critics wonder what he is doing in race. Supporters (if there are any) would claim that he is a closer who might be helped by the additional distance.  He’ll surely need that, and a career performance, to be close.

 

Hollywood screenplays aside, we are interested in making money.  If the stars align on Saturday, our selection will have reinforced three very important concepts, two of which can be applied to all pari-mutuel wagering situations (including financial markets). 

 

1) Search for “Value”: In the stock market, one rarely makes money by buying stocks whose best-case scenario is already “priced in”.  Often, the key to outperforming the market is selling while the sentiment is extremely optimistic, or, similarly, buying before the news turns positive.  Ideally, one will always be a step ahead of the crowd.

 

In order to make money at the racetrack, I find that the same principles apply.  As a result, I am always looking for a horse who is potentially on the verge of his best effort, while not being an obvious selection on the surface.  Of course, this requires a reasonable amount of well-directed research. 

 

In Saturday’s field, the primary contenders may be categorized in the following way:

 

A)    Priced in:

 

-         At 7 for 7, Smarty Jones has done little wrong in his brief career.  If he is able to duplicate his strong Derby performance, there is a good chance that he will be 2/3 of the way to a Triple Crown.  Therefore, if he wins I will not be surprised.  However, as mentioned above, betting on a short price who will be the routing favorite of the nation is hardly a way to make money.  Therefore, if you have a contrarian inclination, here is some ammunition to defend your elimination of the favorite: 1) You can’t expect everything to go well forever.  He had the perfect trip in the Derby despite the potential traffic problems that can arise in a race with 18 horses (In fact, he narrowly avoided being squeezed going into the first turn).  He seemed to love the quirky Churchill Downs surface.  He has peaked at exactly the right time.  Will he finally fall victim to “racing luck” on Saturday?  2) His journeyman jockey is…well, a journeyman jockey.  Don’t get me wrong, I am a big fan of Stewart Elliot. I made a lot of money betting on his mounts at Suffolk Downs in the late 1980’s.  (Suffolk Downs is a second rate track in Boston, where, ironically, Seabiscuit was discovered and rescued from obscurity by trainer Tom Smith). But after 20+ years of riding, he is what he is.  He will not turn into the second coming of Bill Shoemaker overnight.  Therefore, if Mr. Elliot fails to duplicate his flawless performance in the Derby, would anyone be surprised?  3) His two biggest wins came on wet tracks.  Is he better in the slop than on firm ground?  4) The Derby was very, very slow.  Even Smarty Jones, who looked impressive in the stretch, was nearly crawling to the wire in a pedestrian 26 4/5 seconds for the final quarter of a mile.

 

-         I am eliminating Lion Heart for the same reason that I bet him in the Derby (albeit @ 11-1 earlier in the week thru a market maker, and not the 5-1 final odds at Churchill).  He had everything his way in the Derby.  He was the lone early speed.  He ran at a pace of his choosing on the best part of the racetrack and…he wasn’t good enough.  Equally, in his other two starts this year, he gained the early lead at a reasonable pace and was caught both times.  Seems that we need to accept him for what he is: A very nice miler (or slightly longer) who has distance limitations.  He could win, but I think it would be by default.  Not the kind of horse I want to take 3-1 on, despite his reasonably impressive speed figures, and the fact that he will probably lead to the top of the stretch again (at least).

 

B) The question marks:

 

-         Imperialism will be a hot topic of conversation.  I guarantee that at least once in the NBC telecast someone will mention that jockey Kent Desormeaux feels that his mount got a bad trip in the Derby, finished with “a lot of gas left in the tank,” and would have been a huge threat under better circumstances.  Take these comments with a grain of salt.  Asking for objective information about a horse from a jockey (or even a trainer sometimes) is like asking a fisherman about the size of a prize catch.  Sure Kent, you got a bad trip, but can one expect to come from dead last in an 18-horse field without encountering any traffic problems?  It seems that he does.  In the past this style has worked to his benefit (Fusaichi Pegasus as the trouble-free, come-from-the-clouds winner in the 2000 Kentucky Derby) or severely backfired (Fusaichi Pegasus as failed favorite in 2000 Breeder’s Cup after Desormeaux intentionally kept him at the back of the pack despite the horse’s obvious desire to run on).  In any case, would not consider him a “sneaky” play like some would suggest.   Can’t expect to see something new after 16 races in one calendar year.  What we have seen hasn’t been good enough to win this race unless others falter.

 

-         Eddington will be bet due to presence of jockey Bailey, the “potential” tag he has been given by his trainer, and decent speed figures.  However, I don’t see anything to suggest that he is likely to offer a performance capable of winning this race at this point in his career.

 

B)     The value:

 

-  Rock Hard Ten could be any kind.  Nearly anyone who has watched this horse gallop has been awed by his rare combination of size and athletic ability.  After two easy wins to start his career, he was immediately thrown to the wolves in the Santa Anita Derby.  As opposed to Smarty Jones in the Kentucky Derby (where everything went right), Rock Hard Ten got a horrible ride from jockey David Flores.  After breaking well, he lost ground/momentum at the first turn when Flores seemed to lose command briefly and Rock Hard Ten went wider than necessary.  Into the far turn he was fanned four wide (not desirable for a horse with such good tactical speed) but he still had enough to reach the leaders with little effort.  Just as it appeared that Rock Hard Ten would cruise to a relatively easy victory, Flores struck him with the whip and then lost control as the horse “ducked in” to avoid the whip and came all the way across four paths back to the rail.  This cost him considerable ground and stole the best part of his final kick.  In the end, he was beaten by a head, but disqualified to third for interfering with Imperialism in the stretch, (despite the fact that the latter would have had absolutely no chance to pass him regardless.)  This week’s prospects seem brighter.  Hall-of-Famer Gary Stevens (the rider in his two wins) has been reunited with Rock Hard Ten for the Preakness.  Stevens was also the rider for the last “monster” horse who ran in the Triple Crown (Point Given in 2001) and handled the big colt extremely well, winning both the Preakness and the Belmont.  At the very least, he should improve substantially on Flores’ performance.  If he runs back to the Santa Anita race and gets a good “trip,” Rock Hard Ten could win.  However, it is also possible that he could improve off his last (after six weeks to grow and mature), and run a huge race.  In this case, Rock Hard Ten might be able to beat Smarty Jones, even at his best.  On the other hand, racing in the Preakness in only his 4^th start might be a premature move into the spotlight, even for a budding star.  However, at any price 4-1 or greater, I am willing to roll the dice.

 

 

2) Beware of Misleading Statistics.  As a trader/money manager who relies on quantitative models to make a living, I am constantly sorting through statistics.  In the best case, statistics are invaluable tools in helping to analyze data sets, lending a perspective that would be nearly impossible to gain without them.  In the worst case, statistics can be sirens that steer you to shipwreck.  Saturday, we are likely to hear that only one horse in the last 20 years has skipped the Derby and won the Preakness.  On this basis alone, one could easily eliminate Rock Hard Ten and Eddington (and the other three non-Derby starters) without any further consideration.  However, accepting this statistic at face value, without any further probing, might lead us down the wrong path.  Instead, we must first ask, “How many times in the last 20 years have two horses that would have been included amongst the top six betting choices been eliminated from an oversubscribed Kentucky Derby field on the basis of earnings?”  The answer: zero. Due to a very weak field (relative to other years) in the Derby, marginal horses were encouraged to run, thus leading to a situation where two legitimate contenders were prevented from running. This fact has a significant bearing on our 1 for 20 stat.  Usually, Derby-skipping Preakness starters have intentionally avoided the former for the reason that their trainers do not think that they are good enough to win the Derby.  These same horses re-appear at the Preakness, thinking that they might “steal” the race with more time to prepare and an additional three or four week’s rest.  In the past 15 years, I can remember only one time when a legitimate Kentucky Derby contender was held out of the race to focus on the Preakness.  The horse: Red Bullet in 2000.  He went on to defeat prohibitive favorite Fusaichi Pegasus who seemed unbeatable at 1/5.  This year, there are two Red Bullets in Eddington and Rock Hard Ten.  While it is not certain that one of them will swing the upset, the chances are certainly better than the 1 in 20 that we might expect if we didn’t know better.

 

3) A win ticket is merely a call option.  When betting on a horse to win at 4-1 or greater, the “upside” of your selection must be a primary consideration.  Hence, we must think about not only how fast a horse is likely to run today, but also how fast he could run if all goes well (as well as the probability of that “outlier” event).  When choosing between two horses whose expected time is exactly the same, the horse with the greater “upside” is clearly the better bet (or the one whose performance standard deviation is the greater).  While the “mean” race for both horses might not be good enough to win under any circumstances, one “inconsistent” or “unpredictable” horse might be good enough to win on his best day (due to a wide variation in his potential) but might be equally terrible on his worst day.  At the same time, the other might be “consistent” enough to be close all the time, but might not have the potential to beat all of the other horses, even on his best day.  In this case, it is important to remember that if you are betting to win, second place and last place have the same result: a losing ticket.  Therefore, we must be far more concerned with upside potential than downside risk.  I think that this condition is clearly illustrated when comparing Rock Hard Ten and Imperialism, since both should go off at about the same price in the Preakness (if the track is not muddy). They both were clocked at roughly the same time when they ran against each other in April (although Imperialism got a clear run up the rail while Rock Hard Ten had the nightmare trip described above).  However, even if we consider that result to be even, Imperialism has run 16 races.  Horses rarely improve much after 16 races.  On the other hand, Rock Hard Ten has run three races and could easily improve by leaps and bounds in the next few months.  In this case, who is the better bet?  To me, the answer is crystal clear.

 

Summary:  The play is Rock Hard Ten to win at odds of 4-1 or better.  This applies to a dry track only.  If the track comes up muddy we will probably pass.  In that case, the top three from the Derby are the probably the ones to beat (Imperialism should be there if there is a heavy mud and the track favors come-from-behind types, Lion Heart should be there if it is sloppy and early speed favoring).  For those of you who like to shoot for the moon, I think both Sir Shackleton and Song of the Sword have an outside chance of being on the board at a huge price (for exacta and trifecta purposes).

 

Good Luck,

 

“Clock” Murphy