$2 to Show on Number 4.
My high school was located across the street from the Santa Anita Race Track in Arcadia. On occasion my friends and I would go to the 9th race after school. The 9th race was the last race of the day and it was always free. The minimum bet was $2. After no analysis, we would place our $2 bets on some random horse, lose our money and then drive home.
The race track is a great place to learn about investing because you are constantly surrounded by noise. At the track everybody has a hot tip or knows a guy who knows a guy who knows the trainer. The race track is the epicenter of tips, rumors, gossip and bandy. Everybody who is placing a bet is convinced they know something you don’t. It would surprise me if most of these arm-chair handicappers used any type of data or research to help them pick their horses before they placed a bet.
After going to the race track for some time, I finally discovered The Racing Forum. The Racing Forum is full of data. The Racing Forum was my first introduction to using data and research to increase my odds of winning at the track. On one memorable Saturday afternoon my friends and I were at the race track in pursuit of our fortune. After reviewing the data, one of my friends and I bet a $5 boxed exacta on horses #1 and #5. We hit the exacta and each won $150. To a high school student who was not yet working this was all the money in the world. After the races, my friend and I treated the others to dinner at a local Mexican restaurant. I started to increase my odds at the track by using the data and doing my research.
In addition to discovering the data, I also noticed the fastest and strongest horses usually won. The best horses, more often than not, won a majority of their races. The great horses found a way to win. It is hard to imagine betting against Man o’ War, Secretariat, Ack Ack, Seabiscuit, John Henry or American Pharaoh.
Today’s investor is surrounded by noise. With a heavy blend of CNBC, Twitter and Facebook there is no shortage of hot tips and rumors. It is easy for an investor to get sucked into this vortex of noise and make decisions that are not in their best interest. The investor today needs to do their research and invest in the best companies. A company with solid earnings, revenue and cash flow will usually put you in the winner’s circle. In addition, a company that has a strong leader and management team should treat you well over the course of the race.
Do you give the horse its strength or clothe its neck with a flowing mane? Do you make it leap like a locust, striking terror with its proud snorting? It paws fiercely, rejoicing in its strength, and charges into the fray. It laughs at fear, afraid of nothing; it does not shy away from the sword. The quiver rattles against its side, along with the flashing spear and lance. In frenzied excitement it eats up the ground; it cannot stand still when the trumpet sounds. Job 39:19-24
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www.parrottwealth.com