A Horse Racing Handicapper on Finding Mispriced Bets
Price X Probability = Value
The entire world of investing is that simple too. Here is what I mean. If a horse has a 33 percent [chance] of winning a race, and if you can get odds of 2-to-1 on him (which means tripling your money), there is no value – the horse is priced correctly. If a horse is 6-to-5 (which means you will only get back 120 percent of your bet) and he is only 33 percent to win, then he is a terrible bet. If you’re going to get 4-to-1 (quintupling your money) on a 33 percent chance winner, then it’s a great bet.
The majority of people who play horses refuse to think that way. They sometimes say that no horse is worth taking a short price on. That’s just not true. If a horse is 90 percent to win a race and you’re going to get a 50 percent ROI, then he is one of the greatest bets in history. They sometimes say that all long shots are over-bet and that you should never bet on a long shot. That’s not true either. If a horse has a 10 percent chance of winning a race and he’s 20-to-1, then you’re getting double the value [that] you should.