Chasing Down the Derby
When it comes to buying horses, many owners, trainers, and bloodstock agents—the experts that owners hire to evaluate and ultimately purchase Thoroughbreds—agree that a powerful-looking horse with an equally strong bloodline to past champions or to horses that have sired past champions is the safest investment. As such, those horses command seven-figure prices as yearlings. But that doesn’t mean that the owners who instead invest in horses that could be characterized as long shots, based on their pedigrees or inferiorities in appearance, can’t find success on the track or in the breeding stables following a horse’s racing career. I’ll Have Another sold for only $11,000 as a yearling in 2010, for example, but he went on to win two of the three Triple Crown races in 2012 and earned more than $2 million in purses. Likewise, Seattle Slew was sold as a yearling for $17,500 in 1975—hardly the headlining Thoroughbred of that sale. But at the height of the horse’s value in the late 1980s (following a successful Triple Crown campaign in 1977), the stallion was worth $120 million.
“This whole business feeds off billionaires with big egos. You can’t get in a bidding war,” says Craig Bernick, the president of Glen Hill Farm in Ocala, Fla. “You have to set a value on a horse and stick to it.”
Bernick took over as the head of his family’s farm in 2008 and initially attended auctions like Keeneland’s yearling sale with the intent of buying about a dozen horses, which he says was necessary at the time to improve the farm’s overall breeding stock. Now, with an improved stable of horses at his disposal, Bernick aims to spend that same amount of money on only two to four horses per sale. He almost always buys fillies because, as he explains, they’re safer purchases. “There’s a residual value with a filly even if it’s not a great value,” he says, explaining that a filly who isn’t a strong runner can still be desirable as a broodmare, especially if she comes with a strong pedigree. “A $500,000 filly [who doesn’t run] will be worth $100,000 to $150,000, and if they work out, they can be worth millions.”
To steal an analogy from golf, buying young colts at auction is the ultimate risk-reward shot. The best examples are sure to cost seven figures and they’ll lose all residual value if they don’t amount to much on the track. But if they’re great competitors, colts can go on to live long, lucrative lives as stallions, where one-time stud fees can reach six figures. Considering that the top stallions will mate with 100 mares or more each season, the return on such a risky investment is enticing.
Some owners have no desire to enter the racing arena and instead focus solely on breeding. Bernick is not one of them. But unlike some owners, who own and race horses just as a hobby and are less concerned about making a profit, Bernick must make careful choices to stay in the black. Considering that it costs about $50,000 to properly raise and train a single racehorse each year, recouping those expenses requires a safety net. For Bernick, that net is a stable full of fillies. “You have to make $2 million in purses to make the racing game pay off,” he says. “We try to make up the losses with the values of the horses. The horse business is what I want to do for the rest of my life, so the company has to have a business model that makes sense. As long as the values of the horses go up and are greater than the total cost of the business, that’s our benchmark for success.
“And if you have a horse that hits big,” he continues, “it pays for everything. If a horse runs, there’s almost no price where it’s not worth the money.”