California Chrome: A rare lesson in horse investing
Friday, June 06, 2014 - 02:47
June 6 - Dumb Ass Partners paid less than $11,000 to breed California Chrome and recently rejected a $6 million offer to sell a stake in the first potential Triple Crown winner in almost four decades, but race horse investing is not for the faint of heart. Conway G. Gittens reports.
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Ladies and Gentleman - place your bets!
Not on a horse, but in a horse.
California Chrome is on his way to potentially becoming the first Triple Crown winner in almost four decades, but he's already paid off big for his two owners Steve Coburn and Perry Martin. The two bred the racehorse for less than $11,000 and recently turned down a $6 million investment. That's a 545 fold return!
But picking a potential winner is even riskier than finding the next hot stock.
Daniel Doughtery owns Ride on Curlin, who's also running in the Belmont Stakes.
SOUNDBITE: DANIEL J. DOUGHERTY, OWNER, RIDE ON CURLIN (ENGLISH) SAYING:
"It's a needle in a haystack. It's a needle in a haystack."
Only one in every 500 horses win one of the highest level races, warns says Eric Bishop; he's general manager of race horse Frost Giant and the general manager of Sunrise Stables. He says horse investing is more than just science or art.
SOUNDBITE: ERIC BISHOP, GENERAL MANAGER, FROST GIANT/GENERAL MANAGER, SUNRISE STABLES (ENGLISH) SAYING:
"People that get into this industry have to understand that you need luck. You need luck more than anything."
And if you're feeling lucky, there are a number of ways to invest. You can go it alone as sole owner, or you can partner up with someone - like California Chrome's two working class owners, or you can join a group of investors, known as a syndicate.
REPORTER ON CAMERA: CONWAY G. GITTENS, REUTERS REPORTER (ENGLISH) SAYING:
"You know most people can't afford to invest in a multi-million dollar sports team but they can invest in a race horse for as little as a few thousand bucks."
Think of it as a mutual fund for horse buyers. You buy shares in the race horse and split the winnings.
But that's not the only thing you split
SOUNDBITE: ERIC BISHOP, GENERAL MANAGER, FROST GIANT/ GENERAL MANAGER, SUNRISE STABLES (ENGLISH) SAYING:
"If you see a horse earn a $100,000, you know 20 percent went to the trainer, went to the jockey, went to the stable, that costs come out of the owner's pocket."
Prepare to pay up: There's a management fee that works out to about $400 to $900 divided by members of the syndicate per month...and that doesn't include maintenance of the horse, which runs about $4,000 a month in New York.
With entry level investments ranging from a few thousand dollars to upwards of a million, going to buy a horse requires research, trust, and expertise, starting with you local horse association - all the way to reputable breeders.
Andy Jarrell has been a horse owner and an avid racing fan.
SOUNDBITE: ANDY JARRELL, HORSE ENTHUSIAST (ENGLISH) SAYING:
"You should take somebody with you that knows what they are doing, knows horses - whether it's a trainer, whether it's another owner. You should not go in blind and try to buy something just because you like the way the horse looks. You have to consider breeding."
But in the home stretch, your horse doesn't have to have a previous Triple Crown winner like Secretariat in its blood line to cross the finish line like a winner.
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