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Kentucky Derby Analysis


Demand value!


May 5, New York - Almost two months ago to the day, just minutes after the running of the Fountain of Youth Stakes at Gulfstream Park, a three-year-old prep race that, at least in my mind, unofficially kicks off the Run for the Roses, I was standing on the corner of Lexington Ave. and 68th St. waiting for the light to change when a taxi cab hit a pothole and splashed street water directly into my mouth. Not a little bit of street water, like a half-sip of cheap whiskey; a lot of street water, like a mason jar filled Blanton's bourbon whiskey. It was very salty. Now, with the benefit of hindsight, liquor and mouthwash, I can see that it was nothing short of a grim warning; be prepared for the bitter taste of salty streetwater if you stand around slack-jawed with your mouth hanging open.

That is worth heeding on just about any given day, but especially on Kentucky Derby day, and especially considering that hundreds of thousands of people, many of whom don't know a thoroughbred horse from a riding lawnmower, will bet millions of dollars as if they were the owner/breeder of the Byerley Turk himself.

Imagine an alternate reality where your job is to bet money on horses. You make a living doing it, some years more successfully than others. Imagine that once a year this thing called the NYSE has a big promotion called the "Most Exciting Six-and-a-Half Hours in Stocks." Now, suppose you know what a stock is, but beyond that, well... they shoot stocks, don't they? Still, because it's exciting, you ignore your ignorance and take a day off from you job of betting on horses to "play the stocks." How do you think you'd do? Feeling a bit slack-jawed with your mouth hanging open? Prepare for the salty taste of dirty streetwater.

So, how does one who wants to have some fun tomorrow and maybe bet a little bit of folding money on the Kentucky Derby avoid getting fleeced? That's what we're going to talk about.

Betting the Kentucky Derby

I'm a "value" handicapper. In other words, I look for horses that are under-appreciated by the betting public, and therefore going off at odds higher than I estimate their true chance of winning suggests.

The only way to make money at the racetrack over time is to bet on horses whose odds are higher than their true chances. Whoa, Kevin. Don't you mean the only way to win at the races is to cash tickets? No. Of course one has to cash tickets to win at the races, but because of something called the track "takeout" and "breakage" cashing tickets is not enough. One has to cash tickets that compensate for the takeout and breakage.

The takeout is what allows a racetrack to operate. At Churchill Downs the takeout for win bets is 14%. That means that if th public bets $100,000 on a race, the track "takes out" 14% before paying a dime. After the race, the pool will be $86,000. So as soon as you bet on the race, before it has even run, you have already lost 14% on your wager, period. Over time, this means that for every $1 you should win, you are only getting back $0.86. If your edge in betting is not better than 14%, then it will be impossible to win money over time.

Breakage is even more insidious. Breakage is the downward rounding of the odds on the tote board, and consequently the amount paid on winning bets. A horse who may be 5.8-1 will be rounded down to 5-1, a significant reduction. There is no way to tell ahead of time how breakage will affect your bet, but it is more pronounced for favorites than longshots and over time will take another percent or so from your winning bets.

The bottom line is not only must you correctly select a winner, but you gotta select a winner that is compensating you for the amount the track's takeout and breakage is skimming off the top. In other words, you have to only bet on horses who are going off at odds higher than their real chance of winning the race.

What I have done this year is make an odds line for the Kentucky Derby based on the following factors: Most heavily weighted are Len Ragozin's The Sheets speed figures and the horse's pattern on The Sheets, followed by minor weightings based on pedigree for the classic distance, pace, running style, trainer and jockey.

The Sheets, are refined speed figures that theoretically allow someone to identify patterns based on those numbers. It's like technical analysis, except for horses. The idea is to look for patterns that suggest whether a horse is going to run a poor effort (also called a bounce), a medium effort, or a top effort. Sometimes fast horses lose to slower horses simply because the slower horse was ready to run a "good" race while the faster horse "bounced." In my experience the Ragozin Sheets afford handicappers the best possibility of identifying a longshot that other handicappers disregard, perhaps because the horse looks "slow" on paper according to, say, Beyer speed figures, which are widely used and therefore of questionable value in a parimutuel system, or because of some other conventional wisdom.

Now, on to the analysis. While I am not much of a pace handicapper (too fundamental for me) I do believe the pace scenario of this year, which many say is going to ultra-hot, will not result in a total collapse of the race the way last year's Kentucky Derby did. The reason is that unlike last year, this race has many horses with very strong patterns, much stronger than last year, and strong patterns often allow horses to "run through" compromising situations. Be that as it may, to borrow a Toddo-ism, there's a reason they call it "gambling" instead of "winning."

Here is my line for the race, in post position order:

1 Jazil 12-1
2 Steppenwolfer 20-1
3 Keyed Entry 10-1
4 Sinister Minister 20-1
5 Point Determined 20-1
6 Showing Up 15-1
7 Bob and John 6-1
8 Barbaro 8-1
9 Sharp Humor 40-1
10 A.P. Warrior 10-1
11 Sweetnorthernsaint 15-1
12 Private Vow 50-1
13 Bluegrass Cat 30-1
14 Deputy Glitters 30-1
15 Seaside Retreat 99-1
16 Cause to Believe 50-1
17 Lawyer Ron 15-1
18 Brother Derek 15-1
19 Storm Treasure 50-1
20 Flashy Bull 99-1

Depending on how the betting goes tomorrow, my potential key horses are Bob and John, Keyed Entry and Barbaro. Those are the three horses I most expect to run well and potentially be some value in the win pool (going off at odds higher than I believe truly reflects their chances of winning). Keyed Entry could be extraordinary value.

Steppenwolfer is a horse I was high on early, but after reading his Sheets line and adjusting for pattern, speed and pedigree, I think he looks like a possible "wise guy" horse, or a horse the "smart money" likes and who therefore takes more money than he should - pushing his odds below his true chances of winning. Of the main contenders according to the public, I will play against Sinister Minister, Lawyer Ron, and Brother Derek. Sweetnorthernsaint is fast enough he could bounce after the Illinois Derby and still run a competitive number, but he will not be a key horse for me, just a horse I use in exotics.

I like the patterns for Point Determined, A.P. Warrior but expect Point Determined to be overbet and A.P. Warrior is just a bit slower than Bob and John and Barbaro.

Best of luck and demand value in the race.

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