Investment Closers

Considering I grew up outside of Louisville Kentucky, I know a little bit about horse racing. There are a lot of similarities between horse racing and investing. Horses have track records and statistics you can analyze. Betting odds are good measures of risk and reward, with handicappers attempting to discover market inefficiencies. Think of the trainer as the board of directors and the jockey as management. The distance of a horse race is measured in furlongs. Races usually range from five to slightly over eight furlongs – not too dissimilar from markets cycles when measured in years. As in investing, there are different strategies. Three of the most popular strategies are front-running, stalking, and closing.

Front-runners attempt to steal the race by breaking out early and separating from the pack. When you hear a horse went wire to wire, that’s usually a front-runner winning. A stalker hangs just a few lengths back and makes its move near the end of the race. The stalker does well if there are several front-runners that wear themselves out fighting for the early lead. The closer stays even further back from the front-runner and may look like a complete loser for most of the race. But don’t throw away your ticket just yet! The closer often shines at the end of the race, when the front-runner and stalkers have made their moves and are suffering from exhaustion.

Similar to horse racing, in investing it’s important to know what type of race you’re in and what type of race you should run. This is a long cycle. Being an investment closer makes sense to me, especially at this stage of the cycle. Chasing returns and other investors can wear you out. Save energy and capital for the stretch – you’ll need it! No one likes to be in last place, but there are times when it’s a good strategy.

Closers can often look like they don’t even belong in the race. They’re boring and steady. But then it happens. As the race (or cycle) nears its end, everything changes. The jockey and the horse knew they weren’t out of the race. It was their plan all along. There’s nothing quite like watching a closer come down the stretch after being 10-15 lengths back and blowing past the leaders.

Zenyatta was one of the best closers of all time. Even today, watching her race gives me goose bumps. If you’re struggling at this stage of the market cycle and feel like you’ve been left in the dust by all of the front-runners, I encourage you to watch this two minute race posted by Betfair Hollywood Park. Put yourself in the saddle of the 5 horse (Zenyatta). Enjoy!