01/20/2006 1:00AM

Bull market for horse investors still has legs

Benoit & Associates
Girl Warrior (right), winning the 2005 El Encino at Santa Anita, recently sold for $1 million.

LEXINGTON, Ky. - When the Dow Jones Industrial Average played hopscotch near the 11,000 mark recently, it seemed as if the mavens of Wall Street finance had finally caught on to the sense of well-being that the horse markets have found over the last 18 months or so.

In that regard, the markets for Thoroughbred racing and breeding prospects have been a steadier and more accurate indicator than the trend lines that most Wall Street analysts use.

Beginning with a remarkably robust sale at Keeneland in September 2004, the average and median prices of yearlings and the broodmares that produce them have been steadily ascending.

In 2004, national Thoroughbred auction revenue rose by more than 21 percent to slightly more than $1 billion, and in 2005, the national sales volume increased again by nearly 9 percent to more than $1.1 billion, according to The Blood-Horse.

Last week at the Keeneland January sale of horses of all ages, the trend continued - not abated or diminished, but with greater vigor and force than ever. The January sale exceeded the gross for its 2005 auction on only the third day of this year's seven-day sale and surpassed the greatest total for any January sale on the fifth day.

The previous January sales record for gross returns was $66.7 million in 1988, which included the massive dispersal of Nelson Bunker Hunt's breeding stock, and buyers' accelerated demand this year put the gross in 2006 past that record by more than $5 million.

Compared with the January sale last year, the sales results for 2006 increased by slightly more than 35 percent to a record $72.3 million for gross sales receipts, which is an amazing sum, even allowing for an increase of more than 19 percent in the number of horses sold.

These record returns were not propelled skyward by an elite dispersal or by a handful of enormous prices. Instead, the rise in prices was fueled by intense demand for young, attractive mares who were either broodmare prospects or were carrying their first or second foal.

The sale's highest-priced lot was one of these - Girl Warrior, who sold to Jerre Paxton's Northwest Farms for $1 million.

Girl Warrior, a daughter of leading sire Elusive Quality, is a Grade 2 stakes winner who attracted considerable interest and was consigned by Paramount Sales, agent.

"It was a phenomenal sale," Paramount's Pat Costello said. "There was a lot of money for a nice horse."

The volume of money surprised consignors, Costello noted.

"I thought going into the sale that Girl Warrior would bring $600,000 to $800,000," Costello said. "So, the million was a bit of a surprise. But she was absolutely gorgeous, and added to the racing record, that was very important."

The rationale for the strength of the Thoroughbred auction market is, no doubt, due to a variety of factors.

Not least among these are the economic opportunities for investors today and the lure of racing and breeding.

Pam Robinson owns Brandywine Farm with her husband, Jim, and they are both buyers and sellers in the auction market.

"The market has shown outstanding consistency and vigor in rewarding consignors who bring horses to market," she said. "I believe this is due in part to the nature of what we are selling. While other types of investments may also provide a return to individuals, what other investment is actually fun? So, I think that racehorses, as well as breeding stock, offer an added component that many people find interesting and satisfying."

Rob Whiteley owns Liberation Farm and is co-breeder of such prominent recent racehorses as Henny Hughes, Roman Ruler, Strong Hope, El Corredor, Badge of Silver, and Itty Bitty Pretty.

"There are compelling reasons to look to Thoroughbreds as an investment," Whiteley said. "The fascinating intellectual challenges of doing matings and breeding the racehorse add to the sheer joy of being around horses and watching them run. It's no surprise that investors, particularly real estate investors with lots of equity and cash, are now looking for alternative vehicles for investment. With interest rates still relatively low and the stock market treading water, it's easy to see why wealthy people might want to jump in."

The qualities that make racing and breeding a fascinating undertaking have mixed well with the economic conditions of the day to heighten investment and competition at the sales. With a relatively stable economic forecast this year, the sales market should likewise continue to prosper for the foreseeable future.