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Dark Horses, Long Shots, and Kentucky Derby Betting

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On the first Saturday in May, 20 three-year-old thoroughbreds run for the roses. If you want to make a buck on it, you must come to the dark side.

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So how do you find attractive Derby dark horses? It won't be among the 13 horses that have received serious Derby attention since the beginning of the year. These are Alpha, Creative Cause, Dullahan, El Padrino, Ever So Lucky, Gemologist, Hansen, I'll Have Another, Liaison, Rousing Sermon, Sabercat, Take Charge Indy, and Union Rags. Five other horses, Daddy Nose Best, Howe Great, Optimizer, Prospective, and Went the Day Well, came on the scene later, but are known quantities now. Not all of these horses will actually be in the Derby (the runners are announced on Wednesday, May 2), but if they are, their prospects will be well-known. The only way I know to make money betting these horses is to be an expert handicapper or have inside information.

There will be at least two Derby runners not on the list above. This year for the first time there is an intriguing new category for dark horse bettors. The Derby will list four "also eligible" horses that will be offered the chance to run if any of the 20 starters drop out. Owners of many good horses will not accept these slots due to the trouble and expense of preparing for a Derby run without knowing if their horse will be invited, and also due to the disadvantage of having the highest post position. If one or more of these horses run, especially if the decision is made late, they're likely to be the darkest dark horses in recent Derby memory.

What do you look for in a dark horse? The most important thing is shortening odds, especially in the last few minutes before post time. It also helps to know a little bit about handicapping. The traditional science relies on seven criteria:

1. Is the horse trying to win? I'm not talking about fixed races here (although that does happen), but about trainers putting horses in races for experience without preparing or pushing them hard to win. Owners sometimes like to lengthen the odds on their horses by letting them run easy in a few races before the owner places a large bet and makes an all-out effort to win. One of the pleasant things about Derby betting is that a Derby victory is so valuable that everyone is trying to win, so this is not a factor.

2. Speed. Surprisingly to most people, how fast a horse can run is not the most important factor in racing, but it does matter. There are elaborate systems, the most popular is one devised by Andrew Beyer, for estimating a horse's speed from previous races. If a horse is at long odds because it doesn't have speed, it's a poor dark horse choice. The circumstances that allow a slow horse to win the Derby are essentially random, and their probability is reasonably well-known. You won't find great value here.

3. Pace. There are horses with early speed that like a low post position so they can spring into an early lead, hug the rail (and thereby have the shortest path to the finish line), and hold off all competitors. Other horses are closers who let other horses burn themselves out fighting for the early lead, and then they gallop past everyone on the outside in the stretch. There are permutations and variations of these styles. Depending on the mix of horses in a race, one style or another can have an advantage. Pace is also influenced by weather, track condition, and length (the Derby at one and one-quarter miles, is a relatively long race). If a horse is a long shot in part because it is deemed to have the wrong style, it can be a good dark horse choice. It takes a lot of attention to determine style, and races do not always go the way the experts expect.

4. Class. This refers to the caliber of the competition in a horse's previous races. Horses moving up in class are suspect, and often start with long odds relative to their ratings on other handicapping factors (horses moving down in class are tricky, but there aren't any of these in the Derby because there is no higher class). Derby favorites are generally the horses that have won the important two-year-old and pre-Derby three-year-old races, running against horses of Derby quality. The long shots consist of the losers from these races, along with horses that have never run against top competition. It is the second group that provides the best dark horses for bettors.

5. Trip. This is the most labor-intensive part of handicapping. It involves repeated watching of race films to figure out exactly what happened in a race. Sometimes the tenth place horse almost won, sometimes the second place horse never had a chance of winning. Trip analysis can reveal that the trainer or jockey made mistakes, mistakes likely to be corrected in the future. Assuming you're not an expert doing your own trip handicapping, look for a horse with few or no closely-contested races in its history. These are the horses that have not yet revealed their true character to the trip handicappers.

6. Breeding. With young and relatively untested horses in the Derby, handicappers give a lot of weight to the horse's ancestry. How many Derby winners is it descended from and is its history similar to any of them? For a good dark horse choice, the worse the breeding, the better. You don't want a horse that's just like a previous winner, but slower. You want a horse that's running is unpredictable.

7. Trainer and jockey. Trainers and jockeys play important roles in determining the winner of races. On top of that, the best trainers get the best horses and hire the best jockeys to ride them. This one is trickier than the others. On one hand, you like a new trainer or jockey, because people know less about how good they are. But you won't find many of these in the Derby, and they may be running more to make a name for themselves than because they have much chance of winning. But if a top trainer brings a long shot to Louisville, or a top jockey agrees to ride a long shot, they probably know something you don't.

A longshot paying better than 20-1 has won 14 of the 137 Derbys, about 10% of the time, with an average payout of 34-1. If you bet all long shots, that's a terrible record. There are about seven 20-1 or worse horses running in an average year, so you have to bet on 70 horses for each 34-1 payout. That's a -50% return. On the other hand, if you could identify each year the long shot that is going to win, assuming a long shot does win, you would only have to bet on 10 horses for each payout, a positive 250% return.

In recent times, the picture is better. Six of the last 17 Derbys have been won by long shots, namely in 1995 (Thunder Gulch at 24.50-1), 1999 (Charismatic at 31.30-1), 2002 (War Emblem at 20.50-1), 2005 (Giacomo at 50.30-1), 2009 (Mine That Bird at 50.60-1), and 2010 (Super Saver at 20.90-1). Over that stretch, it was actually slightly profitable to bet all long shots, but it was probably an anomaly. Still, it shows that you don't have to be ashamed of looking for dark horses. You'll probably lose, but you have a fighting chance of making a bet with positive expected value, unlike the people who bet on the favorites, who are more likely to win but less likely to have made positive expected value bets. And if you carry the lesson over to life, to look for the dark horses that are good bets and not worry about failures or other people's opinions, you can be the biggest winner of all.

No positions in stocks mentioned.
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