So, you’ve watched the Kentucky Derby and Preakness Stakes, and you were quite surprised by all the money in circulation. You’ve probably asked yourself, since horse racing is considered a prestigious sport with millions of dollars everywhere you look, why not get a piece of the cake? Why not invest in a horse racing stock?
Well, just because a sport is showcased as a prestigious one, that’s not enough to convince you to become an investor. However, there are several other parameters like popularity of certain events, investment strategies, future plans, and much more that might help you indicate the best investment opportunities.
To be honest, nobody knows in which direction will a stock price go, even experts like Warren Buffet. The process feels like studying horse betting strategies by TwinSpires.com. Yes, you do have data to analyze, but the outcome of the race can go in many different ways.
Let’s dive deeper into the world of horse racing stocks and find out which ones are promising, and when it is the best time to enter the business side of horse racing.
Understanding Horse Racing Stocks
So, what are horse racing stocks? Well, it is quite simple to be honest. Horse racing stocks are companies involved in horse racing and similar activities. We are talking about businesses like Churchill Downs Incorporated (CHDN), Century Casinos, Inc. (CNTY), and Canterbury Park Holding Corporation (CPHC).
These are companies that are making money in many different ways, such as race tracks, gambling operations, online betting platforms, organizing events, sponsorships, and many others.
The Big Players
Before diving into timing, let’s look at some of the key players in this sector:
Churchill Downs Incorporated (CHDN): Famous for hosting the Kentucky Derby, Churchill Downs has diversified into online wagering and casino gaming. As of May 2024, CHDN is trading at around $134.02 with a daily trading volume of nearly half a million shares.
Canterbury Park Holding Corporation (CPHC): This company operates Canterbury Park, a horse racing track in Minnesota, and has also expanded into card casinos. Recently, CPHC stock saw a 6.22% increase, trading at $24.43.
Century Casinos, Inc. (CNTY): Although smaller, Century Casinos operates racetracks and casinos across North America and Europe. Their stock price is more volatile, trading around $3.10 recently.
When to Invest?
1. Market Conditions
The stock market is a bit like a racetrack—timing is everything. Here are some conditions to consider:
Stability of the Economy: Horse racing is an upscale pastime. Strong economies encourage consumers to spend more of their spare cash on entertainment and betting, which increases horse racing organizations’ profits. In contrast, these stocks may see a decline during economic downturns.
Interest rates: Lower interest rates have the potential to increase consumer expenditure and disposable income. Investing in equities related to entertainment and leisure may be encouraged if the Federal Reserve makes any indications about maintaining or reducing interest rates.
Regulatory Environment: Changes in gambling regulations can significantly impact horse racing stocks. Positive changes, like the legalization of online betting in new states, can provide a significant boost.
2. Company-Specific News
Keep an eye on quarterly earnings reports, new partnerships, and expansions. For instance, if Churchill Downs announces a new casino or online betting platform, it might be a good time to invest.
3. Seasonal Trends
Horse racing has its high seasons, notably around major events like the Kentucky Derby in May. Stocks often see a spike in anticipation of these events, making pre-event periods potentially lucrative times to buy.
4. Insider Buying and Institutional Investment
Look for patterns of insider buying or increased institutional investment. These can be strong indicators of a company’s potential growth. Tools like stock screeners can help identify these trends.
Risks to Consider
Investing in horse racing stocks isn’t all sunshine and roses. There are risks:
- Volatility: Horse racing stocks can be highly volatile. The industry is susceptible to economic downturns and changes in consumer behavior.
- Regulatory Risks: Stricter gambling laws or higher taxes on betting can impact profitability.
- Operational Risks: Weather events can lead to cancellations of races, directly affecting revenues.
Recent Trends and Data
Let’s sprinkle in some recent data to spice things up:
Horse racing stocks have shown varied performance. For instance, Churchill Downs saw a modest 2.19% increase in the past year, whereas Century Casinos experienced a slight dip.
Companies like Canterbury Park are continually exploring new opportunities in gaming and entertainment to diversify their income streams, making them more resilient.
Final Words
Before you decide whether or not to get into the horse racing business and become an investor, make sure you thoroughly understand the sport. There is no point in investing in a company that you don’t know much about, and have no idea about its future.
But this is a great opportunity for horse racing fans who want a piece of the action. Horse racing stocks haven’t experienced the same meteoric rise as tech companies in the S&P 500, but the top players still maintain their value and even got a slight increase over the last five years.