NEWS
A high-stakes gamble
Posted: Saturday, July 08, 2000
Buying the July sale topper is a risky investment that sometimes pays off but often does not
It is one of the riskiest gambles in sports. Every July in a dusky Lexington sales pavilion, some deep-pocketed owner signs the sales receipt for the most expensive youngster at the Keeneland July selected yearling sale.
The sheer uncertainty of the moment makes it a high-stakes gamble. Millions are spent every year at Keeneland July based on little more than opinions about pedigree and conformation, a visit to the veterinary repository, and blind faith.
A special aura follows the sale topper after that electrifying moment in the Keeneland sales pavilion. While thousands of yearlings sold in this country every year settle into anonymity until their first starts, the sale topper is the subject of widespread speculation from the sale ring until its racing or breeding career unfolds.
Is a July sale topper a prudent but risky investment, or is it a sucker's bet? Some sale toppers do well, over the long haul if not immediately, and others never do well. But the level of risk-taking largely depends on the buyer's objectives.
If racetrack performance is the goal, then the Powerball lottery might be a more suitable investment vehicle. Odds for the yearling buyer improve if the focus is residual value, which is what the sale topper will be worth when its racing career ends.
Start your engines
The Shangri-La for yearling buyers, of course, is to have a sale topper earn its purchase price or more and then become a superstar stallion. The model for that scenario is A.P. Indy.
The regally bred son of Seattle Slew out of Weekend Surprise, by Secretariat, cut a dashing figure in the sales ring in 1990. It did not hurt that his half brother, Summer Squall, had won the Preakness Stakes (G1) two months earlier. After a prolonged bidding duel between Japanese businessman Tomonori Tsurumaki, acting through British Bloodstock Agency (Ireland), and American trainer D. Wayne Lukas, A.P. Indy was hammered down to Tsurumaki for $2.9-million.
Tsurumaki elected to keep A.P. Indy in this country with trainer Neil Drysdale. Scratched from the Kentucky Derby (G1) on the morning of the race because of a badly bruised foot, A.P. Indy came back to win the 1992 Belmont Stakes (G1) and then won the Breeders' Cup Classic (G1) in the fall to clinch Horse of the Year honors.
Retired after that race to Lane's End near Versailles, Kentucky, A.P. Indy ended his racing career with earnings of $2,979,815, giving Tsurumaki a narrow on-track profit. (Training costs, veterinary costs, and trainer's and jockey's fees put him in the red.) But his racing success boosted his value at stud, which was already significant because of his pedigree.
A.P. Indy stood for a fee of $50,000 initially, and his first crop was well received at the 1995 Keeneland July sale, with 11 yearlings selling for an average of $400,000, third-highest overall. From five crops of racing age, A.P. Indy has already sired 24 stakes winners, including Grade 1 winners Golden Missile, Secret Status, Tomisue's Delight, and Stephen Got Even.
What else is left
A.P. Indy is the exception, however. In general, the racetrack is a poor place to earn back a sale topper's purchase price. In fact, since the Keeneland July selected yearling sale began in 1944, just four sale toppers have earned their purchase price on the racetrack, and only two in the past 40 years (see Table 2).
Apart from A.P. Indy, the only other recent sale topper whose racetrack purses exceeded purchase price was Majestic Prince, who like A.P. Indy was a classic winner. Canadian industrialist Frank McMahon bid a then-record $250,000 for the son of Raise a Native at the 1967 sale. Majestic Prince won the 1969 Kentucky Derby and Preakness Stakes and earned $414,200 from nine victories in ten starts.
vRetired from racing after finishing second to Arts and Letters in the Belmont Stakes, Majestic Prince had a successful career at stud, siring 33 stakes winners from 12 crops, including 1979 Belmont winner Coastal and Grade 1 winners Majestic Light, Sensitive Prince, and Eternal Prince. But Majestic Prince's stature in the 1970s and '80s never approached that of A.P. Indy today.
The only other Keeneland July sale toppers to recoup their purchase prices on the track were Prince Blessed (purchased for $77,000 in 1958, earned $255,805) and filly Fleet Rings (purchased for $46,000 in 1948, earned $58,625).
Both of those yearlings, however, were sold in an era when many more owners bred to race and commercial breeding outfits were the exception. Consequently, the Keeneland sale, while elite among yearling sales, did not offer such easy access to the leading representatives of each year's crop.
Ample evidence of how chancy it is to buy a sale topper who justifies his price is shown in Table 1, which lists each year's Keeneland July sale topper, its purchase price, and its racetrack earnings.
Table 4 lists sale toppers at the Fasig-Tipton Kentucky July sales since 1972. As can be seen, even at Fasig-Tipton, where prices are generally lower than at Keeneland, the sale topper is an iffy proposition to recoup his purchase price. Just three of the 27 sales toppers through the 1998 sale have earned more money on the track than their purchase price.
In comparing decades at the Keeneland sale (Table 3), a good chunk of an investment in the sale topper could be won back at the track in the sale's first 16 years. In the 1940s and '50s, the sale toppers earned an average 50% of their purchase prices.
That average dropped perceptibly in the 1960s (to 27.6%) as the sale grew in prominence and more top-class pedigrees became available. It nose-dived again in the 1970s (10.5%) and reached its nadir in the wildly speculative 1980s.
During that heady decade, when Robert Sangster and the Maktoum brothers bid furiously against each other, the ten sale toppers were
purchased for $54.6-million. On the racetrack, they earned $1,333,849, recouping a mere 2.4% of that investment.
More than half of that sum was earned by 1990 Breeders' Cup Mile (G1) winner Royal Academy, who was sold for $3.5-million and earned $758,994 on the track. From 1983-'85, when the sale reached a ludicrous zenith, Snaafi Dancer, Imperial Falcon, and Seattle Dancer sold for a combined $31,550,000. They earned a total of $165,808.
The 1990s numbers reflect a return to racing suitability after the pedigree-is-everything mantra of the '80s. The nine sale toppers of the 1990s to reach the track thus far-not counting two-year-old Norway, a half brother to A.P. Indy sold for $3-million last year-cost $17,750,000 and have earned $6,678,175 (37.6% of investment) through June 26. Most of that was earned by bookends A.P. Indy and '98 sale topper Fusaichi Pegasus, who has earned back just under half of owner Fusao Sekiguchi's $4-million investment. He has earned $1,038,400, including his smashing Kentucky Derby victory.
Even if Fusaichi Pegasus never adds another penny to his $1,904,400 in earnings, he has already assured Sekiguchi of turning a hefty profit. In late June, Coolmore Stud officials said the Irish-based farm had reached an agreement to purchase the Mr. Prospector colt, and his total value is reported to be between $60- million and $70-million.
Therein lies the reason why so much gambling goes on in July. If a high-priced yearling purchase does well on the racetrack, even without recouping the initial investment, the real money awaits in the breeding shed. Mr. Prospector,
Wajima, and Nureyev are perfect examples of residual value at work.
Mr. Prospector, who topped the 1971 sale at $220,000, had a successful racing career, winning 7-of-14 races with earnings of $112,171, slightly more than half of his initial investment. At stud, however, he became one of the most influential stallions of the late 20th century before his death last year at age 29. He has sired 171 stakes winners through June 26, including the winners of this year's leading classic races in the United States (Fusaichi Pegasus) and Canada (Scatter the Gold in the Queen's Plate Stakes).
Mr. Prospector's total progeny earnings exceed $84-million to date, and the success of his yearlings in the sales ring regularly placed him at or near the top of the Keeneland July sale. He sired the sale topper four consecutive years starting in 1992, and he has been leading North American commercial sire by average in each of the last eight years.
Like Mr. Prospector, Wajima was successful on the racetrack without earning back his purchase price. Bought for a record $600,000 at the 1973 July sale, the Bold Ruler colt won 9-of-16 starts, earned $537,837, and received an Eclipse Award as champion three-year-old in 1975.
He established another record shortly before his retirement when he was syndicated for $7.2-million. While he was no Mr. Prospector at stud-siring 26 stakes winners, including Canadian champion Key to the Moon, from 17 crops-he did not need to be. His syndication provided his ownership group a healthy profit before he covered a single mare.
Nureyev's record
Of the three, Nureyev provided the poorest racecourse return on investment, earning back just $42,522 of the $1.3-million paid for him by the British Bloodstock Agency (England) at the 1978 July sale.
But his breeding (by Northern Dancer out of Special, by *Forli) and racing credentials (he finished first in all three lifetime starts but was disqualified from victory in the 1980 Two Thousand Guineas [Eng-G1] and was named 1980 champion miler in France) assured that he would be in demand when he retired to stud.
His performance certainly has more than justified the investment. Despite a nearly fatal paddock accident in 1987, he has gone on to sire five champions and 113 stakes winners, with more than $59-million in progeny earnings.
Having an eye-opening price tag slapped on a yearling does not automatically mean breeders will come calling when a racing career ends. One example is Imperial Falcon, who sold for $8.25-million in 1984.
He came from the right family, by Northern Dancer and a half brother to champions Glorious Song and Devil's Bag. But he had a foot problem that led to breeder Windfields Farm buying back a half-interest from purchaser BBA (England). He raced just three times, winning twice and earning $13,395, and retired to stand at Windfields for a $5,000 fee in 1988.
Today, Imperial Falcon stands for $1,500 at R Bar S Stallions near Opelousas, Louisiana. His leading runner to date, Keen Falcon, earned $234,902 and is standing in Maine.
John Harrell is a Thoroughbred Times staff writer.
