LOUISVILLE, KENTUCKY – MAY 07: Rich Strike with Sonny Leon up wins the 148th running of the Kentucky … [+]
The 2023 Kentucky Derby odds have Forte as the 3-1 favorite, with Tapit Trice at 5-1 and Angel of Empire at 8-1. Betting $10 on any of these top thoroughbreds to win could earn you $30, $50, or $80, respectively. The “Run for the Roses” is a legendary American tradition held annually at Louisville’s Churchill Downs, where more than 150,000 attendees witness what is known as the most exciting 2+ minutes in sports.
Who is Warren Buffett backing this year? Is he going for a favorite like Forte or a long-shot horse? Last year, Rich Strike won at 80:1 odds in one of the most thrilling come-from-behind victories ever. Unfortunately, Buffett won’t attend the race on Saturday because of a scheduling conflict. Omaha hosting Berkshire Hathaway Inc.’s annual shareholder meeting, which he considers his life’s work and masterpiece. Over 35,000 people are expected to attend and listen to him and his partner Charlie Munger answer questions for more than five hours on business, investing, education, and life. The names of their horses are Apple
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For decades, the first Saturday of May has been marked by two major events – the Kentucky Derby and the annual meeting for Berkshire Hathaway. Although these events may seem vastly different, they both draw massive, engaged crowds and are imbued with a strong sense of tradition. They also involve a financial component that offers an investor or spectator the potential to make money with their money.
While each involves risk-taking in the hopes of achieving a positive outcome, they are two very different activities with different levels of risk, potential reward, and time horizons. Investing, of course, is different from gambling. When you gamble, you own nothing, but when you invest in a stock, you own a share of the underlying company. Nonetheless, investors and gamblers are always trying to improve their odds. It is just a lot easier as an investor.
If you had invested in Berkshire Hathaway stock in 1990, your investment would have increased by a factor of 80, similar to last year’s surprise Kentucky Derby winner Rich Strike, whose odds were 80:1. However, the critical difference is that it would have taken 33 years to see that return, unlike the mere 2 minutes of a horse race.
Few investors can match Warren Buffett’s investment track record, which has earned him a net worth of over $100 billion. Nevertheless, even an average investor can make money by investing in stocks for the long term. Since 1928, the stock market has risen 54% of days, 58% of months, and 73% of years. Over that time, a $10,000 investment in U.S. stocks would have grown to over $35 million.
Over the history of the Kentucky Derby, the percentage of favorites that have won the race over its history is around 35%. The ratio has been much lower recently, with only two favorites winning over the past decade. However, fans of the Derby will attest that a big part of their return on investment is the entertainment value of horse racing which is hard to top. Spectators get to witness the sheer speed and power of majestic thoroughbreds, especially in a neck-to-neck race.
Significant strategy and competition are involved, with jockeys making crucial decisions during the race and trainers carefully preparing horses for each race. The traditions surrounding the Derby are also hard to resist, such as the colorful Silks worn by jockeys, the iconic Mint Juleps enjoyed by spectators, and the trophy presentation in the Winner’s Circle.
So, who does Buffett like at the Kentucky Derby this Saturday? He likes Coca-Cola and the fact that the 175,000 fans will be enjoying a Coke product. It has been one of his long-time core holdings for decades. He makes a penny or so on every sale. They add up.
This author owns Berkshire Hathaway stock and likes Disarm to win Saturday’s, Kentucky Derby. He will attend the Berkshire annual meeting in Omaha, trying to keep his odds in his favor.
