Sid Fernando | Horse Racing Free Tips

Taking Stock: Fifth-Year Stallions and Brody’s Cause

Much has been made lately in Kentucky on farms reducing stud fees in response to the blighted economy, but there’s a group of stallions whose fees would have mostly dropped as a matter of course even in booming times. These are second- through fifth-year stallions; frequently, fees for horses entering their fifth season at stud as their first-crop runners turn three show particularly pronounced drops from their initial fees.

A small commercial breeder contacted me the other day to discuss the reduced 2021 stud fee for a stallion whose first crop is racing at two now. She noted how well the stallion matches her mare on pedigree and physique and the 50% reduction in fee from his first year at stud but worried that “his first 2-year-olds are not yet lighting the racetrack on fire, and his sales figures plummeted this year.”

This is a common dilemma for breeders and stud farms alike. Farms need to price fifth-year horses caught in this tricky bubble attractively enough to attract breeders in order to keep both groups in the game on stallions whose long-term viability in Kentucky will be determined in the next year or two. One false move in pricing could spell commercial disaster for one, the other, or both.

And it’s not just pricing, either, as I told this breeder. “You’d be breeding in his fifth year at stud. You’ll have 5-year-olds, 4-year-olds, 3-year-olds, and 2-year-olds [racing] when you sell [your yearling], so you’d have to really like him, because if they are not successful, it will be tough. And even if they are successful, there’s a ceiling [on price] unless he turns into Curlin.”

Curlin, who’d entered stud at Lane’s End in 2009 for a $75,000 fee, got his first winner in the most dreaded of places–the Central Moscow Hippodrome in Russia, on June 17, 2012. He finished the year ninth on the freshman sire list with no 2-year-old stakes winners to his credit and stood for $25,000 in 2013–his fifth year at stud. The stallion’s yearling average in 2012 was $70,000 versus $137,000 in 2011 for his first-crop yearlings. However, the Horse of the Year eventually turned things around, and by 2015, when his first crop was five, his yearlings averaged $211,000. Curlin will stand for $175,000 in 2021, the same as this year. His 2020 yearlings to date have averaged $342,000.

Stallions with first-crop 3-year-olds next year can change perceptions quickly with a few early-season stakes winners, particularly if they’re on the Classic trail, guaranteeing patronage for another year or two by finishing out the season strong with two crops–3-year-old and 2-year-olds–at the races.

Daredevil did some of this in 2020 with Gl Preakness S. and GI Alabama S. winner Swiss Skydiver and Gl Kentucky Oaks winner Shedaresthedevil after a poor run with his first 2-year-olds, but by then he’d already been jettisoned from Kentucky after only four seasons at stud.

However, it’s the rare stallion that can carry that momentum forward, because he’ll need to do it with mares of decreasing quality in years two, three, and four. Most stallions tend to have their highest output of stakes winners from their first crop, when they get their best mares, and numbers tend to decrease commensurately with a decrease in mare quality.

I noted in this space Feb. 27 (Third- And Fourth-Year Sire Issues) that of the top 10 freshman sires of 2017, five had left Kentucky by 2020–when their first foals were five–including the leader, Overanalyze, along with Shanghai Bobby (#3), Animal Kingdom (#4), Flat Out (#7), and Justin Phillip (#10).

Brody’s Cause

A strong opinion on a horse, formed by an analysis of facts and an evaluation of price versus the competition, is the best way to approach a fifth-year stallion.

For example, Spendthrift’s multiple Grade l winner Brody’s Cause (Giant’s Causeway), a $350,000 yearling purchase for Albaugh Family Stables trained by Dale Romans, will stand in 2021, his fifth year, for $5,000, down from the $12,500 he started out at in 2017 and the $7,500 he was listed at this year. He is ninth on the freshman sire list through today behind leader Not This Time (Giant’s Causeway), another Albaugh horse whose fee has jumped to $40,000 in 2021 from an initial $15,000 in 2017 and the $12,500 in 2020.

However, Brody’s Cause has eye-opening stats versus the competition and at the price.

Both Not This Time and Brody’s Cause are each represented by two black-type winners so far–the most among freshman sires, along with Nyquist (Uncle Mo), whose 2021 fee is $75,000; and Outwork (Uncle Mo), who stands next year for $15,000.

Brody’s Cause is also tied with Not This Time and Nyquist in the top 10 by number of black-type runners with four apiece, but he’s done this from 55 foals to 95 for Not This Time and 80 for Nyquist.

As for the quality of his runners, five of his six winners have won maiden special weights while another, the Bob Baffert-trained filly Kalypso, won for the first time in the Listed Anoakia S. Oct. 18 at Santa Anita after placing in two Del Mar maiden special weights. Kalypso, by the way, was a $240,000 Fasig-Tipton Kentucky July yearling.

On the same day of Kalypso’s win, the gelding Gospel Way ran second in the Listed Display S. at Woodbine–his second stakes placing after a third in the Victoria S. at the same track.

Earlier this month, Brody’s Cause showcased another talented maiden winner. A $185,000 Fasig-Tipton Saratoga yearling for Albaugh and Romans, Smiley Sobotka graduated at Keeneland in his second start in the style of a horse who looks to have a bigger future next year at three. The colt had dead-heated for second in his debut at Ellis over 6 1/2 furlongs but found the mile and a sixteenth at Keeneland much more to his liking.

This brings me to Sittin On Go, Brody’s Cause’s most accomplished runner to date. A $65,000 Keeneland November weanling and $62,000 Keeneland September RNA, he also races for Albaugh and is trained by Romans. Sittin On Go won his debut at Ellis in a five-furlong dirt sprint by four-plus lengths in mid-August and returned last month in the one-mile Glll Iroquois S. at Churchill to win impressively by 2 1/2 lengths. The runner up, Midnight Bourbon (Tiznow), ran third in his next start in the GI Champagne S. at Belmont, though he was beaten by more than 14 lengths by the leader of the division, Jackie’s Warrior (Maclean’s Music). However, the third-place finisher in the Iroquois, Super Stock (Dialed In), also came back to place third to Essential Quality (Tapit) in the Gl Breeders’ Futurity at Keeneland, less than five lengths behind the winner.

Sittin On Go has solid Grade l formlines, and he will test Jackie’s Warrior in the Breeders’ Cup Juvenile next.

Brody’s Cause has one other stakes horse, Girther. A $2,500 Keeneland November weanling, $4,000 Keeneland September yearling, and $20,000 OBS March 2-year-old, Girther won a Del Mar maiden special weight in July in his second start and came back a month later at the same venue to run a neck second to Weston (Hit It a Bomb, also at Spendthrift) in the Gll Best Pal S.

Brody’s Cause won three of eight starts, including the Breeders’ Futurity at two and the GI Toyota Blue Grass S. at three, both at Keeneland, and earned $1,168,138. His sire Giant’s Causeway doesn’t yet have an elite son in North America, but he did in Europe with Shamardal, who died earlier this year. Here, he has the good First Samurai at Claiborne plus several others trying to rise to that level, but in Not This Time and Brody’s Cause he’s still got his name in the hat with two promising young guns, and who knows?

Spendthrift’s flagship horse Into Mischief also started off for $12,500, dropped to $7,500, and is now booked full at $225,000. And the farm’s elder statesman, Malibu Moon, began his career at Country Life in Maryland for $3,000 and went on to sire a GI Kentucky Derby winner among many others of note.

My advice to the small breeder looking for value at $15,000 and down? For the price, Brody’s Cause is worth the gamble.

Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.

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Taking Stock: Keeneland Numbers Are Troubling

With a pandemic that’s led to the loss of 200,000 lives, the loss of jobs, and overall economic instability that’s affected most people except for the super wealthy that are heavily invested in the stock market, no one expected the Keeneland September yearling sale to be anything but down by gross and average versus last year. This was as predictable as saying that an egg dropped on concrete from six feet would break.

So, what’s the damage? Through the first 10 sessions that ended with Book 5 on Wednesday, 2,129 yearlings had sold for a gross of $245,278,700 and an average price of $115,208, with a median of $50,000. The final two sessions on Thursday and Friday that comprise the most inexpensive horses in the sale in Book 6 will not add much to the gross, dropping the average further. Last year, the penultimate session added $2,299,500 to the gross with an average price on the day of $10,646, and the last day added $1,340,300 with an average price of $6,382.

Based on the numbers for the last two days in 2019, you can project that this year’s sale will end with a gross of about $249,000,000 for about 2,500 head sold, which suggests an average of about $100,000 or slightly under, versus 2,974 yearlings sold for $372,348,400 with an average price of $125,201 and a median of $47,000 one year ago. The sale gross will probably be down about 33% and the average down about 20%. Those are big hits nowhere in the neighborhood of anything since the Great Recession of 2007 to 2009.

In 2009, the worst year of the recession, 3,279 yearlings grossed $198,055,200, averaging $60,401 with a median of $22,000. The gross and average figures represented declines of 40% and 34%, respectively, versus the previous year.

Two years prior to that, however, when the economy first showed signs of trouble, the gross of $385,110,600 and the average of $101,317 were down 4% and 10%, respectively, from 2006, suggesting that the declines this year could be a harbinger of worse to come if the economy doesn’t rebound over the next few years. In other words, the first year of deep economic turmoil doesn’t usually tell the whole story of what’s about to unravel, and if we’re already down a third by gross and about 20% by average now, what will happen next year and the year after if troubles continue? Those are sobering thoughts.

One other crinkle worth mentioning: every year from 2006 to 2019, 63% to 72% of the catalog has sold. This year, however, for the first time, the sale is on pace to see a transaction rate of less than 60% from horses catalogued, including “outs” and RNAs. Many of those that were outs or didn’t make reserves were higher-priced horses, and their absence significantly impacted the gross. For example, if you add about 5% of the catalog back into the mix at an average price of $200,000 (and that’s a low estimate considering the number of buybacks out of Book 1 alone), that’s conservatively about $43,000,000 that could have raised the gross to $292,000,000. Under this scenario, the gross would have declined 22% instead of the projected 33%. Likewise, the average would have been about $117,000, or a decline of 7% instead of 20%.

Top of the Market

Keeneland’s Director of Sales Operations Geoffrey Russell addressed this issue in TDN after Book 1 concluded, saying, “We are in that Book 1 market where people are willing to send horses to the racetrack. As we go through the sale, there are people who are commercial breeders with commercial crops who have to sell, so hopefully we see a change in that.”

What that translates to is that the people who sell at the top end of the market are more financially secure and can keep those horses they don’t sell, but those below the top are less solvent and have to sell to generate cash flow, particularly in the bottom half of the market. The numbers bear this out. In Book 1, only 228 of 448 catalogued, or 51%, sold. In Book 5, in contrast, 500 of 792, or 63%, sold–a figure on the low end of historical trends but still within the parameters.

Therefore, as predictable as the declines were this year, it was just as predictable that the top of the market would be the least affected by the conditions. One reason, as noted earlier, is the strength of the stock market. Unlike other economic indicators, the stock market was near all-time highs through the first week of the two-week sale and is mostly in a bubble that’s not representative of the general economic malaise that’s plagued the rest of society. Those folks invested in it haven’t lost money, and they spent commensurately at Keeneland at the top end. Last year, there were 22 lots that made $1 million or more, and this year the number was 15, though the group from a year ago brought significantly more in aggregate, headed by the $8.2 million American Pharoah filly from Leslie’s Lady purchased by Mandy Pope. This year the top price was the $2 million Tapit colt from Tara’s Tango purchased by the partnership of Eclipse, Robert LaPenta, Gainesway, and Ron Winchell. Eclipse, LaPenta, and Bridlewood had earlier been partners in the purchase of Tapwrit (Tapit) for $1.2 million at Fasig-Tipton in 2015. Gainesway and Pope later joined the group in the ownership of the colt that would win the Gl Belmont S. and is now at stud at Gainesway.

An increase in partnerships for stallion prospects has been a feature of select portions of yearling sales in recent years, fueling some of its growth, but it probably reached its apex this year. It had heated up particularly after the success of Justify, purchased for $500,000 at Keeneland in 2016 by WinStar, China Horse Club, and SF Bloodstock and later sold for big bucks to Coolmore. Justify was followed closely by a trio of successes for the reconstituted buying group of SF Bloodstock, Starlight, Madaket, and partners, self-dubbed “The Avengers,” whose scores include Grade l winner Eight Rings (Empire Maker), sold for stud to Coolmore; DQ’d Grade l winner Charlatan (Speightstown), sold to a syndicate headed by John Sikura at Hill ‘n’ Dale; and Grade l Kentucky Derby winner Authentic (Into Mischief), whose breeding rights were sold to Spendthrift. All three were purchased at Keeneland in 2018 and represented massive returns on investment like Justify.

The Avengers were back and bigger again this year, along with other groups following the same plan. The Jockey Club’s 140-mare cap rule, which takes effect for horses foaled in 2020 or later, probably helped to fuel prices and prop the market even higher despite current economic conditions, because current yearlings were foaled in 2019 and will not be limited to the restriction should they make it to the breeding shed–meaning, that they have a chance to make more money at stud. Next year’s sale featuring foals of 2020, however, will likely be dampened by the 140-mare restriction–an industry-made valve that will have the unintended consequence of closing off money flow for yearling colts during what could be another economically challenging year.

And if the stock market, which is highly volatile, does crash in the next year or two–remember that it was in 2009, two years after the economy started melting, that the Dow Jones bottomed–the industry could be in for even tougher times. It was after the 2007-2009 recession that foal crops settled at the 18,000-20,000 foals-per-year range, which was down from the 35,000 range before 2007. Further upheaval will drop crops down more, shrinking all aspects of the industry with it.

In March in this space, I wrote this about the last decade, when the stock market recovered and grew to new heights: “The sizes of annual foal crops, however, were completely unaffected by a rising stock market over this time span. This striking anomaly indicates that even in the best of times, the foal crop will not rise, but under adverse economic conditions, it falls significantly and will likely fall again if the market bottoms. This peculiar relationship of flat foal crops within a rising stock market also suggests that the top parts of the yearling market are healthy–mirroring society at large, where the wealthy keep getting a greater piece of the pie–and those participating in this sector are expanding their equine holdings as those at the bottom are being squeezed out, keeping foal production stable through a statistical sleight of hand.”

That is what it is.

Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.

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Taking Stock: Race Records and Stallion Prospects

Sackatoga Stable’s Tiz the Law (Constitution) was a Grade l winner at two, won the Grade l Florida Derby this year, and goes for the first Classic of the season as the favorite in the Gl Belmont S. on Saturday. His breeding rights have been tied up for months, and if he does nothing from here on in–highly unlikely as that is–he’ll still have a place at stud at a prominent farm.

Tiz the Law’s racetrack future is bright. After the Belmont, he’ll likely contest the Gl Travers at Saratoga in August ahead of the Gl Kentucky Derby in September and the Gl Preakness in October, and a win in one or more of those races will only burnish his resume and take him to another level as a stallion prospect.

Classic winners who were also highest-level winners at two are the most sought-after types in the breeding shed among both owner-breeders and commercial breeders, and at this moment Tiz the Law is perhaps the only colt of his generation with a legitimate chance to attain that status.

Godolphin’s Maxfield (Street Sense) was another Grade l-winning juvenile like Tiz the Law who had a chance to become a Classic winner this year, but following a comeback win in the Glll Matt Winn S. at Churchill Downs last month, he suffered a fracture in his first breeze back and it appears likely his career is over. If he’s done racing, his record will stand at three wins from three starts, including a top-level win in the GI Breeders’ Futurity at Keeneland in his second start, and he’ll probably go to stud at Darley, Godolphin’s breeding arm, where his sire stands.

Nadal didn’t win a Grade l race at two, but he was undefeated in his four career starts, including the GI Arkansas Derby, and was a leading contender for the Classics before he suffered a career-ending fracture in a workout, too. One of his owners, George Bolton, has said he’ll go to stud next year, though where that may be hasn’t been announced yet.

Fragile Horses
Victoria Keith, who’s affiliated with Fox Hill Farm, tweeted on June 10: “At some point, racing may want to address the fragility of the breed. Several top 3yos out with injury, Maxfield the latest, who’s had 2 bone injuries in 3 starts.”

She followed that tweet with this one: “Where are the soundness stats? In an industry full of handicapping, nick, and other data, shouldn’t owners and breeders be equipped with soundness data when they make their breeding and buying decisions?”

Keith certainly raises some legitimate questions, something Fox Hill dealt with after the death of the stable’s Eight Belles (Unbridled’s Song) in the Kentucky Derby gallop-out. In fact, it’s an issue that’s been addressed since the beginnings of the sport, and you can throw a dart into any time frame since and find commentary on the issue from various angles. In the Nov. 13, 1961, issue of Sports Illustrated, for example, Whitney Tower, writing about some racetrack injuries, referenced this quote from the Chronicle of the Horse: “Far more important has been the long established practice of breeders to put to stud any animal which will transmit speed, no matter what its shortcomings in other respects. Thus, there have crept into the Thoroughbred breed various types of inherited unsoundness–crooked legs, round ankles, bad knees, shelly feet, curby hocks, soft and brittle bones.”

In 1961, there were far more owner-breeders in the sport who raced the horses they bred, but nowadays, especially in Kentucky, commercial breeders dominate the landscape, and because they frequently use first-crop sires as an investment strategy, there isn’t any “soundness data” on the offspring of these horses on which to base mating or buying decisions, except for their own race records.

And race records are sometimes unreliable guides to future sire performance. Raise a Native (Native Dancer) and Northern Dancer (Nearctic) were both foaled in 1961. The latter won the Kentucky Derby and Preakness and went on to a fabulous stud career that is still profound to this day. But the former, a brilliantly fast and undefeated black-type winner who made only four starts at two before bowing a tendon, has been just as influential, particularly as the sire of Mr. Prospector.

Northern Dancer sired his version of Raise a Native in Danzig, a foal of 1977 who won each of his three starts–none in stakes company–before a bum knee stopped him. Contrast him to Temperence Hill (Stop the Music), the champion 3-year-old colt of their crop in 1980 and the winner of the Belmont S. who made 31 starts. As a stallion, Temperence Hill sired sound stock, getting 83% starters to foals, but he got only 4% black-type winners to foals. Danzig, on the other hand, gave up some soundness, at 77% starters to foals, but sired better horses, with 18% black-type winners.

Nureyev (Northern Dancer), like Danzig, also made only three starts, finishing first in all of them, but he was disqualified from the G1 2000 Guineas and officially had only Group 3 credit next to his name, though he was also named a champion French miler. He, too, became a world-class sire, getting 81% starters to foals and 17% black-type winners. His name has already been peppered throughout the pedigrees of several European Classic and Group 1 winners so far this season. Claiborne stood Danzig but bred Nureyev, whose homebred dam, Special, raced only once, finishing unplaced, because she was a bleeder.

Claiborne also bred and stood Drone (Sir Gaylord), who broke down after four wins from four starts–none in stakes company. A foal of 1966, Drone sired 80% starters from foals and 9% black type winners. He’s been an influential broodmare sire. More recently, Claiborne stands Mastery (Candy Ride {Arg}), a Grade I winner at two and undefeated in four starts. His career, like those of Nadal and Maxfield, was cut short by a condylar fracture. His stud services have been highly sought despite a limited career.

Not This Time
On the same day–June 10–that Maxfield’s injury was announced and Keith tweeted her concerns for the “fragility of the breed,” Not This Time (Giant’s Causeway), a first-crop sire who made four lifetime starts and won one Grade lll race, was represented by the session and eventual sales topper at the OBS Spring sale. Hip 1254, a filly out of Sheza Smoke Show who’d worked the fastest quarter-mile at the sale in :20 1/5, brought $1,350,000 from Gary Young. The next-highest price that day was the $800,000 that D.J. Stable paid for a Candy Ride (Arg) colt (Hip 561) who’d worked a furlong in :10 1/5.

Not This Time sustained a soft tissue injury and he never raced after two. Candy Ride, likewise, had a career-ending soft tissue injury when he was four and was plagued by foot problems throughout his career, which lasted for all of six starts–the same as Pulpit and his son Tapit. He was undefeated in three starts in Argentina and three in the U.S., and he was a Grade l winner on two continents. He’s since become a premier stallion and has sired such as Horse of the Year Gun Runner, who came into his own as an older horse, and Mastery, an outstanding 2-year-old.

Not This Time, who stands at Taylor Made and entered stud for a $15,000 fee, has not put off buyers with his abbreviated race record. Aside from the sale topper, the horse was represented at OBS with lots that made $700,000 and $575,000 as well. It’s also notable that WinStar’s Speightster (Speightstown), a homebred who entered stud for a $10,000 fee and also has first-crop runners, had the third-highest price at OBS, a colt who sold for $1.1 million. Speightster won three of four starts, his only stakes win a Grade lll race.

Both Speightster and Not This Time are just beginning their careers and are represented by winners from limited opportunities available this year. They have a long way to go to become recognized as successful sires, but their early results have already earned them the support of horsemen in the sales ring. And they are exactly the types of horses, along with the Masterys, Nadals, and Maxfields, that Keith questions as stud prospects and that Whitney Tower’s article from almost 60 years ago addressed, but it’s from this pool of types with abbreviated race records that have also sprung breed-shaping horses like Raise a Native, Danzig, and Nureyev.

In short, it’s difficult to predict sire success from a race record alone. And if it turns out, years from now, that Maxfield becomes a better sire than Tiz the Law or any of his other contemporaries who carve out longer careers, it shouldn’t surprise anyone with a knowledge of history.

Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.

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