Triple Crown Lessons

Can investors learn anything from the Triple Crown?

Photo: Peter Wright. Source: Pixabay

American Pharoah’s win on Saturday at the Belmont Stakes makes him the first Triple Crown winner since Affirmed earned the honor in 1978, and the twelfth in history. He’s also only the fourth Crown winner in over 65 years. It’s a hard to win all three races—the Kentucky Derby, the Preakness, and the Belmont Stakes. The races are quite different—different track lengths, different field sizes. Most horses who race at Belmont don’t run in the other two races—so they’re fresh. And horse racing is hard. These three-year old thoroughbreds are high-strung and don’t have a lot of experience in a series of demanding, stressful contests.

So what can investors take away from the end of a 37-year gap? First, long odds are long for a reason. Even though American Pharoah was a favorite going into the Kentucky Derby, the odds started out 10:1 against that he wouldn’t win the Crown. Second, patience matters. Winning jockey Victor Espinoza had two prior runs at the Crown—in 2002 and last year—but his mounts faltered in the final race. The third time was the charm for the 43-year old.

American Pharoah and Espinoza after winning the Preakness. Source: Wikipedia

Finally, winners win. This horse had outstanding training and breeding. Some observers say that he floats down the track. And his bloodlines run back to War Admiral and Secretariat, and also include more recent Derby, Preakness, and Belmont champions. His sire line is stamina-oriented, but the female line has many speed horses. Because of this pedigree and his wins, some estimate that the stallion may be worth $50 million.

Damon Runyon would have loved this horse. He was the celebrated author of Guys and Dolls, who wrote a lot about book-making and gambling. He once noted that all of life is a bet that’s six to five against. And he’s supposed to have said that the race isn’t always to the swift, nor the battle to the strong. But that’s the way to bet.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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By | 2017-07-17T12:22:45+00:00 June 8th, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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