The Business of Making Money with Horses
By
Don Blazer
Copyright
© 2002
Lesson
Three
Weanlings:
Big Potential for Profits
At first glance, selecting a weanling of any breed seems to be the
biggest gamble of all.
It is not! In fact, it may be your
safest return on investment opportunity.
On the surface, you are dealing with a baby from three to 11 months old,
unbroken except to lead and groom, and essentially untrained. And it is difficult to know exactly what you
will have in a year or more. All this
tends to make a lot of people stay away from weanlings, which means their
price, at sales, is usually less than their true value. (Consider the fact that most weanlings sold
at public auction will bring only about the cost of the breeding fee. Someone other than you paid to have the mare
bred, paid to keep her for the gestation period of 11 months and 10 days, and
paid to keep both the mare and the foal until sale time. Add to all that expense the normal health
care costs, and it is easy to see a healthy weanling at the price of a breeding
fee is a steal.
So immediately you know you have two factors to your advantage. First, no matter what weanling you purchase,
you know that in most cases you won’t overpay if the price is about the same as
the stallion’s service fee. Second, most
of the buyers at a sale are not interested in weanlings, so it is easier for
you to acquire your top selection.
There are a lot of risks between the date of breeding and the time a horse
begins to perform, whether it is racing, cutting, jumping, or driving. With the purchase of a weanling, you are
splitting the cost of taking a horse to the point of performance. The price you pay for the weanling is the
reward the seller gets for assuming the risks from breeding to weaning. If the seller doesn’t make a profit, that’s
his problem. He probably didn’t know how
to have horses make money for him. If
you buy a bargain, for you it is another step to a big percentage return on a
small initial investment.
When you sell your purchase, you will get the reward for assuming the
risks from weaning to point of sale. And
those risks can be minor since the horse is generally under no major stress.
At the time of reselling—with no effort on your part—you have two more
factors which are working to your advantage.
First, yearlings and horses ready to perform almost always bring the
highest sale prices. (The exceptions are
the elite stallions and mares just ready to begin breeding, and stallion or
mare syndications.) Secondly, the high
rollers are willing to pay an extra bonus for yearlings and horses ready to
perform because they are eager to get started; they want action now, and they
want your horse!
If you buy a healthy, sound weanling at a sale, and you care for it
until it is a yearling, or is ready to perform, you will undoubtedly make a
profit of some sort if you sell prior to the time the horse enters any form of
competition.
You may have to tell someone you have the horse for sale, but sometimes,
even that isn’t necessary. I have
purchased weanlings and resold them at a profit in less than three hours. (It has happened more than once when other
buyers realized what a bargain I had purchased.
I took a small profit—large percentage—and they still got what they
wanted at a very reasonable price.)
Weanlings are very salable.
However, you are in the business of having horses make you a lot of
money, so you won’t purchase a weanling just on surface appeal. You will be doing a great deal of
studying. That means you will read every
page of the sale catalog and you will compare every weanling offered with every
other weanling. You will be looking for
potential. (If you are looking for
potential in weanlings not at a public auction, then you will have to construct
your own catalog page. Develop the
catalog page well in advance of looking at the weanlings. You can develop your catalog page by getting
the name of the sire and the dam from the seller, then contacting the breed
association for pedigree information.)
The purchase of a weanling, as the purchase of any other horse intended
to make a profit, is based on potential and no other factors.
To reduce the risks of a weanling purchase even further, most horsemen,
including myself, recommend buying fillies.
If a colt can’t run, win at the big shows, cut cattle, or jump, then both your resale and stud service potential are
gone. Not just reduced, but gone!
You might get lucky and sell the colt
(probably now a gelding) for a private pleasure horse, but you can be sure you
won’t get much. Your possible resale
buyers know the risks inherent with a colt, and so they are not anxious to spend
the big bucks on anything less than a stallion prospect with superior
bloodlines. Even a great-looking colt
without an impeccable pedigree is a risk the majority of buyers at sales don’t
want to take. On the other hand, if a
filly can’t run, jump, or win the big shows, she can almost always produce
foals. (You don’t want her as a
broodmare, because she most likely won’t make you a lot of money, but that’s
covered in another lesson.) But because
she can produce foals, someone will buy her.
Older mares without a record still average a better resale price at
sales than do older geldings or stallions without a record.
That’s taking a negative look at
some good reasons for buying a filly.
But looking at the positive side, the picture is much brighter. Fillies generally bring higher prices at time
of resale. Colts with
weak pedigrees, whether weanlings, yearlings, or two-year-olds, do not command
good prices. A colt with an
average pedigree will bring less than a filly with an average pedigree. Fillies and mares maintain a higher average
sale price at public sales than do stallions and geldings. (At “performance sales—the best performers,
regardless of gender, bring the biggest prices.
They are the ones with “potential.”)
The only time colts demand more than fillies is
when the colts are extremely well-bred, good-looking and have big potential as
a performer; then they are most often the sale toppers.
Of course, there is always the private sale, when almost anything can
happen, and usually does. There is no
ceiling on the price of fillies or colts at private sales. Colts do just as well as
fillies at private sale, as you will note in an upcoming example.
The first example is an unnamed bay filly by the stallion, Call Me Gotta.
This filly, foaled on
Call Me Gotta was a good race horse with solid
bloodlines. As the catalog sheet shows,
he was a Champion two-year-old, stakes winner and earner of $135,000. At the date of the sale, his first foals are
yearlings, so there are no facts about his ability to produce, just POTENTIAL.
The first dam is Hula Skirt, a stakes winning daughter of Tru Tru. Hula Skirt only had an 87 Speed Index, and it
would be best if you could purchase the offspring of a Triple A (AAA) rather than just a Double A (AA) mare. But, had she been Triple A, the price of her
first foal probably would have been much higher, and that would not be good for
you.
The weanling filly offered is the first foal of Hula Skirt, so she has
no proven produce record, only POTENTIAL.
The second dam, Dancing Jacket, is a Thoroughbred, without a speed
index. She was a winner, but not of
much. This will keep the price of the
weanling down slightly. What will
increase the weanling’s price, and her later resale price, is the fact that Dancing
Jacket produced two stakes winners out of six foals. Four of the six foals earned the Register of
Merit (ROM) and one of the six was too young at the time of the sale to have an
established record; more potential.
The third dam did not do much, but the fourth dam was a winner and
produced a stakes winner, and a stakes-placed mare
Fire on Three, who ran out more than $100,000.
Note how well the female side of this breeding has done. The weanling considered is a filly. There is enough black type in the pedigree to
guarantee more sizzle for the potential of the weanling being offered.
This is the kind of pedigree you seek; it is full of potential. It doesn’t matter what breed you are
purchasing. It is all the same—Paints,
Arabians, or National Show Horses—everyone is seeking a satisfaction and the
horse you are looking for must have the potential to provide it. If the catalog sheet shows a lot of winners,
at any event, then you’ve got potential for big profit in purchasing and
reselling any weanling which interests you.
You are hunting for the catalog sheet which offers great potential. You are not looking at horses; you are
looking at the potential they offer.
You’ll look at the horse later.
If the weanling is the daughter of a stakes winner who has produced
stakes winners, the price of the weanling will probably be too high to make her
a good purchase. Too much of a good
thing will make it more difficult to produce a big return on investment without
adding a positive performance record.
And adding a positive performance record can be very difficult. Once you go into competition, if the filly
doesn’t perform exceptionally well, then she will be a bigger profit
loser. This is the case of a
modestly-priced weanling being a better deal.
If the catalog sheets show no black type, no winners, no horses of
merit, then even if the weanling goes for nothing, there is no potential for
profit at a later sale. Skip very cheap
horses. They are cheap because they have
no potential and there is no way short of a miracle for them to attain the
needed potential.
Hip No. 16 at the McGhan Sale sold for the
amazingly low price of $8,000.
The filly was subsequently entered in the All American Select Yearling
Sale at
The performance chart on the filly shows a number of costs involved with
her maintenance and subsequent resale.
The cost of the weanling is a fact.
In any case, even with the high estimated costs, the filly produced a
profit of $16,540 in less than one year.
She produced a return on investment
of 122.8 per cent.
Unnamed
filly by CALL ME GOTTA—Hip No. 16
|
|
Expense |
Income |
|
Cost of weanling |
$ 8,000.00 |
|
|
|
$ 480.00 |
|
|
Veterinarian |
$ 380.00 |
|
|
Farrier |
$ 100.00 |
|
|
Pasture, 10 mos. @ $100 per mo. |
$
1,000.00 |
|
|
Additional hay |
$ 200.00 |
|
|
Grain and vitamins |
$ 200.00 |
|
|
Transportation to sale |
$ 300.00 |
|
|
Preparation at sale |
$ 300.00 |
|
|
Futurity payment |
$ 500.00 |
|
|
Cost of entering sale |
$ 500.00 |
|
|
Selling price received |
|
$
30,000.00 |
|
Sales commission |
$ 1,500.00 |
|
|
|
|
|
|
Total cost and expense |
$
13,460.00 |
|
|
Total income |
|
$
30,000.00 |
|
|
|
|
|
Net Profit……..$16,540 |
|
|
NET PROFIT………………$16,540
Return on Investment
(ROI) 122.8 per cent.
(Total amount of profit divided by
total investment.)
Now, if 122.8 per cent return on your investment in less than one year
isn’t a lot of money, I don’t know what is.
Considering the initial dollar outlay was only $8,480, and the other
expenses averaged only $440 per month, you have a small investment. But if you took the same total a mount of
money--$13,460—and put it in a treasury bill at the all-time high of 16 per
cent, you would only have earned a profit of $2,153. A 16 per cent return on your investment would
be considered an absolutely phenomenal return today, but it certainly won’t
make you as much money as a 122 per cent return. And if you put the money in a savings account
at 2.5 per cent yield, the only absolute is that you will lose money. Inflation in 2002 was low at only 3 per
cent. In a savings account there is no
risk…..you would have positively lost one-half per cent on your money in
2002. What interest rate are you getting
today on your savings?
Also, keep in mind that you really didn’t have a cash outlay of $1,500
of the $13,460 in costs. The $1,500 was
a sales commission which was paid after the sale and prior to the time the
$16,540 in profit was paid.
If you take off the $1,500, which did not come out of the seller’s
pocket, then the total out-of-pocket expense was only $11,960, making the
monthly cost of maintenance an out-of-pocket expense of only $340 per month.
A ROI of 122.8 per cent on an $11,960 investment in less than one year
sounds almost criminal. But it is a
fact, and it happens, and it is easy to do again and again and again.
If $16,000 in profits is not big enough for you, then you’ll want to go
into business on a little larger scale.
Words of caution—don’t invest your lunch money. Know what you can afford to lose.
You can play the Make Money With Horses game on
any level you like. It is up to you.
Here’s what you can hope to do if you play with more dollars. These examples don’t happen every day, but
fortunately for us, they happen often enough not to be considered uncommon.
Majorie Cutlich
purchased a weanling for $15,000. We
don’t know for sure what she spent in the next eight months to care for the
weanling, but let’s say she spent $10,000.
That makes her investment $25,000.
She sold the weanling after eight months for $270,000, giving her a
profit of $245,000.
That kind of profit and return on investment ought to satisfy anyone.
But how about Donna Wormser
who bought a weanling for $14,000?
Let’s say she also spent $10,000 keeping her horse for 10 months. She resold her $24,000 investment for
$375,000 to make a net profit of $351,000 in less than one year.
If you think you can’t make money—big money—in the horse business, think
again.
Pinhooking is such big business now, that the major breed magazines
include the activities of pinhookers as part of their report on horse sales.
When buyers are optimistic about the
potential a horse offers, expect to see pinhookers making unbelievable
returns. The last time I looked,
pinhookers in the Thoroughbred industry were enjoying a very nice rate of
return of 88.4 per cent. That was up
from 56.8 per cent the year before. This
is the age of opportunity for making money with horses.
Recent reports show weanlings costing less than $10,000 at the major
Thoroughbred sales have resold for an average price of $40,000; that’s a 148
per cent return on investment. Weanlings
selling between $10 and $20,000 were returning 118.6 per cent. Now just so you will realize it is not all
roses, weanling selling for between $30 and $40,000 returned only 16.9 per cent
that year.
Here’s another great return, except it is calculated on a very small
budget.
This example is a colt. I don’t
recommend buying weanling colts for resale at sales, but they do make
money. This colt was not resold at a
sale, but was sold privately.
Nashville Shadow was purchased at a sale. His pedigree did not have as much potential
as I would normally like, but it had some.
The colt was an outstanding individual conformationally,
which added substantially to his potential.
The first dam was a stakes-placed mare that
had produced five foals to race. Three
were winners, one of which was stakes placed.
The mare, however, was an older mare—17 years old. She obviously hadn’t produced as much as we
would have liked, and it wasn’t likely she would produce more.
What made me buy this weanling was the fact the mare had a very
good-looking yearling colt which sold prior to the full brother weanling. When the yearling brought an excellent price,
the weanling suddenly had a lot more POTENTIAL!
|
|
Expense |
Income |
|
Cost of weanling |
$ 1,300.00 |
|
|
|
$ 78.00 |
|
|
Veterinarian |
$ 300.00 |
|
|
Farrier |
$ 100.00 |
|
|
Board, 7 mos. @ $135 per mo. |
$ 945.00 |
|
|
All American nomination fee |
$ 50.00 |
|
|
Total cost and expense |
$
2,773.00 |
|
|
|
|
|
|
Sold privately |
|
$
6,500.00 |
|
|
|
|
|
Net Profit……..$3,727 |
|
|
NET PROFIT………………$3,727
Return on Investment (ROI) is 134 per
cent.
Jet charger had proven himself to be only a
fair sire. He produced runners, but his potential—at
12 years of age—was limited.
Nashville Shadow was worth a risk only because he was a good-looking
colt, his selling price was low--$1,300, the catalog sheet shows some black
type and possibilities, and he had a yearling brother ready to go into race
training, which could add some new sizzle to the potential. Still, this type of purchase should not be a
high priority. It was a legitimate
purchase by the rules, but not a great buy.
The example is included only to demonstrate that weanlings frequently
offer big rewards on small investments.
Nashville Shadow was entered in the All American Futurity, a million
dollar race, to provide some sales appeal.
The initial cost of entry was only $50, so the investment was minor in
comparison to the “sizzle.”
The colt was not advertised, but was shown to normal barn traffic. One such person liked the colt and purchased
him for $6,500. The profit on the colt
was $3,737 and the return on the investment was 134 per cent. Not bad for a horse held only seven
months. Not bad, and yes, lucky. But you make your own luck.
When you consider the total investment was only $2,773, the profit was
considerable.
The final example is included to show what happens when the rules are
not followed.
Brides Request is a filly by a young stallion, A Zure
Request. As shown by the catalog sheet,
A Zure Request did very well as a race horse, and has
the pedigree to be a good sire—that’s potential, and it’s what you’re seeking.
The first dam, however, puts the purchaser of this filly in
trouble. A Thoroughbred, Summer Bride
was not a winner. She only placed at 3
and 4, which proves she wasn’t a good race horse. There is no potential there.
As a producer, Summer Bride is the dam of four foals, three of which
went to the races. Two foals were
winners, and one of the two was a Quarter Horse, the same as Brides
Request. That shows an ounce of
potential. But even a pound of cure
won’t make up for the lack of “sizzle” come sale time.
The second dam, Dusty Bride, was not a winner, although she produced
three winners. But do three winners add
up to potential? In
this case, no. None did
much. And earnings of $13,456 for a
Thoroughbred are very small.
The third dam shows no potential either.
And by the time you get to the fourth dam, even the black type there is
too little, too late.
Brides Request sold for $2,000 as a weanling, and the cost of keeping
her until sale time as a yearling were minimal.
The total cost and expense was $5,495.
The selling price at the All American Sale was $6,500, and was
predicated on the potential of the stallion, A Zure
Request. (A Zure
Request later proved himself the sire of some speed, and gained modest
popularity.)
The net profit on the weanling filly was $1,005, and the ROI was 19 per
cent.
Granted 19 per cent return on an investment of only $5,000 is pretty
good in comparison with many other types of businesses. But it was somewhat risky because the total
potential was weak. The
potential of the stallion and the fact that the weanling was a filly—two of the
rules to follow—are the only two things which saved this investment. Pass when the weanling offered doesn’t show
excellent potential on the catalog sheet.
BRIDES
REQUEST
|
|
Expense |
Income |
|
Cost of weanling |
$ 2,000.00 |
|
|
|
$ 120.00 |
|
|
Veterinarian |
$ 300.00 |
|
|
Farrier |
$ 100.00 |
|
|
Board, 10 mos. @ $135 per mo. |
$
1,350.00 |
|
|
Transportation to sale |
$
300.00 |
|
|
(Owner
groomed and showed |
|
|
|
horse - no
outside costs) |
|
|
|
All American Futurity payment |
$ 500.00 |
|
|
Cost of entering sale |
$ 500.00 |
|
|
Selling price received |
|
$ 6,500.00
|
|
Sales commission |
$ 325.00 |
|
|
|
|
|
|
Total cost and expense |
$
5,495.00 |
|
|
Total income |
|
$
6,500.00 |
|
|
|
|
|
Net Profit……..$1,005 |
|
|
NET PROFIT………………..$1,005
Return on investment (ROI) 19 per
cent.
Weanlings are good profit makers, and often require a small investment
and very little physical work. But you
must follow the rules.
Rules
for Pinhooking
1. Purchase fillies.
2. The weanling must be by a well-bred stallion who has proven himself a better
than average
performer, but does not yet have a long record as a sire.
3. The first dam must have proven herself an
excellent performer, or an excellent
producer. The produce of an average first dam should be
passed.
4. The second dam must also be a performance
winner, or the producer of
performance
winners. The second dam is still very
important when seeking
potential. She must show it. If the second dam is stronger than the first
dam,
that is even
better. But a strong dam can never make
up for a weak first dam.
Do not fall in to the trap of thinking you
can slip one through and make a big
profit based on a
strong second dam. Smart buyers just
won’t pay the price, and
the less than
bright buyers only purchase cheap horses.
5. The third and fourth dams are not too
important. A lack of black type or
performance
record will not hurt. Third and fourth
dams, however, should have
produced
something. If they haven’t produced,
then the entire line lacks potential.
6. The weanling must be sound and without
obvious injury when purchased, and when
resold.
Potential is the key! The
weanling being resold as a yearling will make money if she is good-looking, is
by a solid, yet unproven sire, and is out of good-performing and/or producing
first and second dams.
If you don’t follow these rules, don’t blame anyone buy yourself if the
weanling doesn’t make money.
And if you say it’s too hard to find
weanlings which meet all the requirements, you are wrong. It’s not too hard, it’s just hard. That’s one of the reasons buyers aren’t
making a log of money with weanlings.
Pass the ones which don’t measure up in conformation, blood, and
potential. It is always better to pass
500 than to buy one bad one. If horses
are going to make you a lot of money, then you’ll have to put in a little
effort and a lot of patience.
Don’t buy because you are caught up in the excitement of the sale. Don’t buy because you want some action. And don’t buy hoping your normal good luck
will make things turn out well.
If the dollar amounts in the examples are not big enough to suit you,
just play with bigger bucks. (All breeds
have the same potential for enormous returns on small investments.) You can play at any financial level. And you can play with more than one horse, so
you can double, triple or quadruple your income anytime you choose.
The scale on which you decide to get started is completely up to
you. The important thing is to get
started. It is a business, and time is
money, and you could be making a lot of it, now!