Another year of two year old in training sales are upon us! Here’s a review of previous year’s results, a look at new formats and other developments at various venues for 2015, and our prediction as to what the numbers will look like when this year’s two year old auctions are in the books...

There have been some notable changes in the two year old sales market for 2015. Keeneland cancelled their sale altogether, a recognition of the fact that for all intents and purposes, the two year old market has come to be dominated by Florida based sales, in particular OBS March and OBS April, which between them now comprise about 2/3 of the total of all two year olds sold at public auction at major North American sales venues. However, the first major two year old sale of the season for 2015 is the boutique Fasig-Tipton Florida Two Year Olds in training sale, which will be held for the first time at Gulfstream Park on March 4th with 175 horses cataloged. Last year, this sale was held on March 24th (after the OBS March select sale) at Adena Springs Farm near Ocala, with 157 horses cataloged, but less than 100 offered on sale day after pre-sale scratches. 47 horses were sold in 2014 for a total of just over $13,370,000, an average of $284,000 and a median of $180,000, with a staggering 38 RNAs (not sold). This compared to 46 sold for a total of $17,725,000 in 2013 with 32 RNAs, for a $385,000 average and a $300,000 median. Traditionally this sale has been the place for buyers competing at the highest levels of the market to bid on the cream of the crop of two year olds offered at public auction, at least in terms of pedigrees, but as the OBS March select sale has come to attract more and more of the top horses and gain the attention of most if not all of the major buyers worldwide, the Fasig-Tipton sale has struggled to maintain traction. With more horses cataloged this year at a much more favorable location (Gulfstream Park is where most of the top horses, owners and trainers are in March), Fasig-Tipton Florida has the chance to rebound in 2015 and perhaps re-establish itself as a venue to sell a horse that ticks all the boxes for the highest-end buyers in terms of pedigree, conformation, and fast workout times. Fasig-Tipton has made a concerted effort at personal outreach in recent years to buyers at all levels, and has worked especially hard to bring new people to their elite two year old sale this year. To cite a personal example, even though our stable, Kenwood Racing, is known to shop at other venues, we received a personal email from Fasig’s Owner & Buyer Relations Manager (a dedicated management position few other sales companies have), Reed Ringler, detailing the sale’s new location and highlighting Frank Stronach’s (owner of Gulfstream Park and Adena Springs Farm) decision to offer 40 horses who will open gallop without recording pre-sale workout times. This is a welcome development that only an owner with Stronach’ s deep pockets could afford to do. Stronach and Fasig-Tipton deserve great credit for trying something people have talked about for many years. For the past couple of decades savvy horsemen have decried the focus on ever faster workout times at two year old sales; a fast 1/8 mile breeze in March says little about the ability of a horse to go 6 furlongs (let alone 1&1/4 miles) in an actual race, while at the same time breaking down far too many young horses not mature enough to stand the stress of getting them to breeze in 10.0 seconds when most are not yet chronologically 2 years old. While most people agree that any skilled horseman should be able to tell how well a young horse moves by watching them in an untimed gallop, buyers have spoken by usually paying a substantial premium for the horses who post the fastest works, and consignors and sales companies really can’t be blamed for giving the buyers what they seem to want. Stronach is attempting to demonstrate that you can sell a good horse based on pedigree, confirmation and the way it moves in an open gallop, without risking its future racing career with fast pre-sale workouts. If his gamble proves successful it could begin to reverse the trend towards fast workouts that has dominated the 2 year old market for decades, which would in the long run benefit buyers, sellers, and horses.

Turning to the bellwether OBS (Ocala Breeders’ Sales Company) venues that as mentioned above have come to dominate the two year old market in recent years, the season will kick off with the March Select sale on March 17th & 18th, then continue with the huge April sale on April 21-24 (4 days) and end with the June two year old and horses of racing age sale on June 16-19th (4 days). The March sale features a limited book of select two year olds and it’s no surprise that this sale has become the place for buyers to shop for the very best horses considering the results OBS March sales graduates have posted. For example, in 2014 the OBS March sale sold a total of 6 Grade 1 winners and 16 Graded Stakes winners, compared to 3 and 12 respectively for Keeneland April, Barrett’s March and Fasig-Tipton March (their three main competitors) combined. Not surprisingly, averages have gone through the roof the last few years at OBS March, with 198 horses grossing a record $37,817,500 in 2014, flying past the record previous gross of $33,380,000 set in 2008 and compared with 185 horses grossing a total of $28,794,000 in 2013. The average price in 2014 was a sale record $190,997 up 22.7% from 2013’s record $155,643. The 2014 median was a sale record $137,500, a ten percent increase over 2013’s sale record $125,000. The buyback percentage was 24.1% in 2014, modestly higher than the 21.6% in 2013. This year, OBS initially announced an expansion to a three day sale, with the 3rd day featuring a group of attractive individuals with somewhat lesser pedigrees (call it some of the cream of the April horses or “March light”), but in response to some confusion and criticism about the format made a last minute change and kept the sale at 2 days, mixing the traditional March and “March light” horses together. With the addition of these horses OBS March has cataloged 610 horses this year compared to just over 412 in 2014. It remains to be seen if the market can absorb that many more offerings and maintain their upward momentum. If the overall averages suffer, look for OBS to return to a smaller number of horses and remain with a 2 day sale next year.
The OBS April sale with well over 1000 horses spread over 4 days traditionally offers something for buyers in every price range. Here too OBS graduates have generally out-performed those from competing venues and the sale has in recent years grown to the point that it has become the proxy for the entire two year old sales market, much like the Keeneland September sale for yearlings. In 2014, 767 horses grossed a record $57,032,000 compared with 815 horses sold for $48,757,000 in 2013. The average price was $74,357 in 2014, up 24.3% over 2013’s record $59,825 while the median soared to $47,000, 34.3% above the previous record $35,000 set in 2013. The buyback percentage was 18.5% in 2014 compared to 14% the year before. Fifty-two sold for $200,000 or more in April 2014, compared with 38 at the 2013 sale. Last year, OBS turned away several hundred horses from the April sale simply to keep the number of days and horses manageable and the same will hold true this year. Most of those horses end up in the June sale, which used to be viewed (with a few notable exceptions) as a sale of horses lacking the attributes necessary to get into the April sale. With the addition of a number of former April horses in the last year or two, OBS June has gained traction as a sale where a nice horse can be found for people who are willing to accept less pedigree in return for not having to compete against the top echelon of buyers who now regularly attend both the March select and the April open sales at OBS. In 2014, 706 two-year-olds sold for a sale record $22,498,300 in June, surpassing the 2013 Sale when 439 horses grossed a record $14,596,700. The average was $31,867 compared with $33,250 in 2013, while the median price held steady at $20,000. The buyback percentage was 20.7% in 2014, virtually the same as the 21.6% in 2013, all impressive numbers indeed when you consider they sold 267 more horses in 2014 than in the previous year.

The Fasig-Tipton Midtlantic sale held in Maryland May 18 & 19th has also seen record sales averages the last few years, attracting a sizable number of people who race from New York to Virginia due to its convenient location and reputation as a place to find good racehorses at reasonable prices. Maybe it’s just being across the street from Michael’s, the best place for Crab cakes in the world, that brings out the buyers, but Fasig-Tipton has sold a lot of nice two year olds at the Midlantic sale! The horses and sales averages in general are fairly comparable to the OBS April open sale. In 2014, 329 horses brought $19,601,000, an average of $59,578 and a median of $31,000, with 101 horses listed as not sold. These numbers were clearly off from the 249 horses that brought $16,675,000 in 2013, an average of $66,968 and a median of $40,000 with just 43 horses listed as not sold. Clearly the significantly expanded number of horses offered in 2014 was more than the market could absorb without a decline in sales averages, although the overall results weren’t bad. Not detailed here is the February 23rd two year old sale at Barretts, this year cataloging just 116 horses, the Fasig-Tipton Texas sale on March 31st , or any other regional two year old sales. Barretts & Fasig-Tipton Texas are basically sales for California - Texas based two year old buyers and while each has sold some nice horses in the past and fills a useful niche, a sheer lack of numbers make them secondary venues to the Florida based sales which have come to dominate the market. With Keeneland out of the picture with the cancellation of their April two year old sale as mentioned above, chalk it up to good weather, good marketing, good results or plain good luck if you wish, but bottom line it looks like Florida for better or worse is where the two year action is in 2015 and probably will remain for some time to come.

So the question is, after several years of gains in overall average and median for the most of the leading two year old venues from 2012-2014, what will the numbers look like when 2015 is in the books? Recall that in 2012 the U.S. was finally emerging from the worst economic decline since the 1929 depression. It took the new administration several years to clean up the mess George Bush & Co. made of the U.S. economy, but by 2012 things had recovered to the point that people had the money and confidence to return to investing in luxuries like owning racehorses. In other words, after several really down years, we had nowhere to go but up. With lower prices, smaller foal crops and a somewhat larger pool of better off buyers, the laws of supply and demand took over and sale averages soared. But what goes up eventually comes down. This year, after a record 2014 pushed two year old prices to levels unseen in many years, even with the economy continuing to make progress and the stock market at record levels it would be no surprise to see the two year market take a bit of a breather. If last year’s yearling and breeding stock sales in Kentucky in September and November were any indication, while there remains plenty of money for exceptional individuals at the top end of the market, there was a lack of demand for any horse who did not tick all the boxes for at least one of a very small group of top-end buyers, as well as noticeable soft spots in the middle market.

Overall, yearling, weanling, and broodmare averages for 2014 the most part remained about level with 2013 figures, as opposed to the sizable gains in the previous couple of years. We think that this will follow through with two year old sales in 2015, with average sale prices, medians, and buybacks at the 5 sales detailed above (Fasig-Tipton Florida, Fasig-Tipton Midlantic, and the three OBS sales) remaining steady or declining slightly, though if the stock market were to have a significant correction prior to the sales, all bets are off! We think OBS March, with their expanded catalog including some horses with slightly more modest pedigrees will decline perhaps 5-10%. Look for Fasig-Tipton Florida with their new location and format along with a concerted outreach to attract new buyers to do well at Gulfstream, with perhaps a nice increase over last year’s anemic numbers. OBS April will be the main story, there we’re looking for something on par with last year’s averages (which remember were records). The Fasig-Tipton Midlantic sale is a hard one to figure but with a lot of horses offered in Florida in March and April and an overall market that we think has about topped out, numbers equal to last year should be seen as a sign of market strength while another modest decline in the average and median wouldn’t be any shock. The OBS June sale could go either way, more horses to sell but also a better catalog than in years past; June could take a dive if the market turns out to be weaker than expected in the previous sales, but it could hold steady or even show a modest increase if the overall two year old market is stronger than we anticipate this year.

So where is the best place to purchase a good two year old at public auction in 2015? A good horse can come from anywhere; all of the above mentioned sales are going to have graduates who end up performing at the highest levels in years to come. OBS has lived up to their unofficial motto of “more for your money” over the years, and just in terms of sheer numbers offered are going to have plenty to brag about by the time many of these youngsters reach the races this fall. But the best approach without question is to attend as many sales as possible armed with plenty of pre-sale research, a good team to work the sale, a reasonable budget, plenty of patience and perspective, and a genuine understanding of what you are trying to accomplish. Few people can afford to buy million dollar horses and that’s not where the best risk-return numbers lie. Decades of statistics prove it’s rarely if ever wise to compete at the highest levels of the market. In terms of the likelihood of ending up with a graded stakes winner and/or a positive return on your investment, you are far better off with ten $100,000 horses than one $1,000,000 horse, plain and simple. If you are looking for a quality racehorse, do your homework and wait for the soft spots. There will be a number of very nice two year olds to be had in the $35,000 - $150,000 range, which history clearly shows is where year after year, most of the stakes winners, graded stakes winners, and profitable horses come from.