Wednesday, February 21, 2018

So You Want to Buy a Derby Horse

It's that time of the year again. Kentucky Derby preps almost every weekend. Top 10/12/20 lists abounding. Rich folks without a horse on the Derby trail waving money around to try to buy a piece of one. So why not ask, if you want a Derby horse, what'll it cost you and where can you find it?

For a thoroughly unscientific study, let's look at the 21 horses with 10 points or more, as of February 22nd, on the Kentucky Derby leader board. I've omitted only one from the full list of 22, the filly Paved, who's not nominated to the Triple Crown and almost certainly won't be in the Derby starting gate.

Where did these 21 come from, what did they cost, and what does that say about the market?

Five of the 21 -- Noble Indy, Bravazo, Firenze Fire, Avery Island and Enticed -- are homebreds, with four of the five from the elite fields of Goldolphin, Calumet and Winstar (the fifth, Firenze Fire, was bred and is raced by Ron Lombardi's Mr. Amore Stable, and in any event has a bit more of a sprinter pedigree than one would like to see in a Derby contender). Back in 2014, when this year's Derby crop was being conceived, the homebreds' sires' published stud fees were:

Medaglia d'Oro (Bolt d'Oro) $100,000
Awesome Again (Bravazo) $75,000
Street Sense (Avery Island) $40,000
Take Charge Indy (Noble Indy) $20,000
Poseidon's Warrior (Firenze Fire) $6,500.

Not quite the top of the market, though Medaglia d'Oro's fee was in the top echelon. And generally proving, as California Chrome did, that a Derby horse can come from anywhere (but don't look for Firenze Fire to throw a lot of classic horses as a stallion).

What about the other 16 horses, the ones that are being raced by someone other than their breeders? One, Mourinho, was sold privately as a two-year-old, for $675,000, with the breeder apparently retaining a minority interest. The other 15 all went through public auctions, as yearlings, as two-year-olds, or in a few cases as both.

Fourteen of the Derby points leaders sold as yearlings in 2016, mostly at the Keeneland September sale, with a few selling at the Fasig-Tipton Saratoga auction. Prices ranged from $1,000,000 for Breeders Cup Juvenile winner and two-year-old champion Good Magic to $20,000 for My Boy Jack, winner of this past weekend's Southwest Stakes at Oaklawn, and $30,000 for Snapper Sinclair, second to longshot Bravazo in Saturday's Risen Star at the Fair Grounds. The aggregate sale price for all 14 horses that went through yearling auctions was $3,693,000, an average of $264,000.

Four horses were sold at two-year-old auctions last year, for prices ranging from $1,050,000 for Instilled Regard (4th in Saturday's Risen Star) down to $180,000 for the pinhooked Snapper Sinclair. In total, the four juvenile sales brought $2,190,000, an average of $548,000.

A decade ago, in a piece for the New York Times' "At the Rail" blog, I predicted that two-year-old sales would increase in prominence as a source of Derby Trail horses. That year (2008), six horses in the Derby field, including the winner, Big Brown, came through the two-year-old market and a seventh was entered in a juvenile sale but didn't meet its reserve. This year, assuming that some two-year-old sales grads don't jump up in the Derby points standings at the last minute, only four of the top 20 will come from juvenile auctions. What happened, other than my making a bad prediction?

First, the collapse of the thoroughbred market after the 2008 financial crisis meant that there were just fewer good horses. The North American foal crop declined from more than 38,000 in 2005, when the 2008 Derby horses were born, to just under 23,000 in 2015, a drop of 40%. While the decline primarily meant that fewer not-so-fast horses were being born, as unproductive mares were retired, it had at least some impact on the top of the market as well. Anecdotally, agents and high-end buyers say that it's tougher now than it was a decade or two ago to find a real classic horse, and that they have to pay more to get it. So perhaps, once someone buys a top yearling, the buyer may be a bit more likely to hold onto it rather than pinhook it into a juvenile sale. Logical, even if I haven't done the studies required to prove the hypothesis.

Second, buyers of elite horses may be learning that the two-year-old auctions are a mixed blessing. On the one hand, a buyer can see how a horse runs on the track and how it has developed from a yearling and have a much better idea of what it will look like as a race horse. On the other hand, the rigorous training necessary to get a yearling two the two-year-old sales, where they breeze an eighth or a quarter of a mile faster than they ever will again, may put too much pressure on young, developing bones and lead to later soundness issues. Here's what I wrote ten years ago, all of it still unfortunately true:

As the importance of these sales grew, so did the role of “pinhookers,” who buy yearlings and then train them over the winter in Florida and sell them as two-year-olds. And so has the importance of the “breezes,” when these young horses run an eighth or a quarter of a mile before the sale. A difference of a few fifths of a second in a breeze time can be worth hundreds of thousands of dollars when the horse enters the auction ring, and the difference between profit or loss for the pinhooker who risked millions buying those yearlings.
Horses at the sales routinely run an eighth of a mile in 10 seconds flat, with the occasional breeze in 9.8 seconds, which will bring the seller millions. That’s a lot faster than horses run in races, and no indicator at all of how they might do going a mile and a quarter in May of their three-year-old year. If you go to the breeze shows before the sales, you’ll see dozens of trainers and bloodstock agents clocking not just the breeze, but also the “gallop out,” how the horse runs for the eighth or quarter of a mile after the wire. Not to mention the extra-slow-motion videos that the truly serious buyers and agents use, the vet exams, heart scans and similar attempts to separate the very best from the merely good.
Perhaps some buyers have learned the lessons provided by two-year-old sales graduates and have decided that buying a yearling and controlling its training on the horse's own timetable rather than that of the sales is the best way to get to the Kentucky Derby. We shall see.