09/09/2013 6:45AM

Keeneland September: Pinhookers ready to restock after strong juvenile season


Business was as good as it’s been in a while for 2-year-old consignors in the spring of 2013.

Record figures were reached at each of the three Ocala Breeders’ Sales Co. juvenile sales, and most major North American 2-year-old auctions posted steady-to-spectacular gains, especially in average sale prices. Now, as the auction calendar rolls into the Keeneland September yearling sale, the pinhooking market that drives the juvenile season must once again restock for next year’s sales.

Buyers looking to flip yearlings for a profit may be entering Keeneland September with more capital than in previous years after a healthy spring, but so are most of their contemporaries. Because the playing field remains essentially level across the board, most pinhookers are not deviating from their usual plans in approaching North America’s largest yearling sale.

“We need inventory, and without inventory, we can’t bring any horses to the sales,” said Steven Venosa of SGV Thoroughbreds. “I just go about it the same as I always have, being extremely selective with my purchases and believing in what I buy. If I sit there and worry about everything, it’s going to affect what I do. In any business, you have to adapt to the current market and just continue moving forward.”

Buyer selectivity and high competition for the horses who fit the bill – both products of a shrinking foal crop and a Thoroughbred market still in recovery – were common themes of discussion among pinhookers leading into the sale, just as they have been for every major auction in recent memory.

“It was evident at this past OBS [August yearling] sale – a horse goes in [the ring], and there was a gang of us following the horse,” Venosa said. “You have a set price, and the next guy has a set price. We’re all landing on the same horses. [It comes down to] who wants to spend the most money on the horse and takes the biggest risk.”

[More Keeneland September coverage: Bellwether auction will test strength of yearling market]
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[Keeneland September: Blame, Quality Road among first-crop sires]
[Keeneland September: Q&A with Nick de Meric and Case Clay]

The competition in the middle markets, where pinhook buyers tend to dwell, has gotten hotter this year, as evidenced by the significant gains in average and median prices at the major yearling sales in Kentucky, Saratoga, and Ocala, Fla., so far in 2013. In such a market, leading juvenile consignor Niall Brennan emphasized that patience and spending within one’s means are more important to long-term success than reaching to win a bidding war.

“The yearling market’s more competitive when you’re out there trying to buy, so from a pinhook perspective, you certainly have to have more discipline when you’re buying,” Brennan said. “You have to be prepared to walk away without buying something, rather than give too much.

“We don’t have a specific number that we put on how many we have to buy to resell,” Brennan added. “We just play that by ear each year. We don’t try to have too many, but there are many sales through the season, so you just have to be patient.”

Because the profit margin on a pinhook is largely based on the difference between a yearling’s purchase price and how much he or she brings as a 2-year-old, pinhookers normally wait until the middle to later sessions of the Keeneland September catalog to start buying. An athletic horse with room to improve who’s acquired at a modest price can carry less risk and generate more profit than a polished yearling secured early in the sale for a headline-grabbing sum.

“You’ve got to put a value on them when you’re buying to resell because the day you buy is really also the day you sell,” Brennan said. “You can buy a very nice horse, but if you pay too much, even if it looks very good and talented, you might only be getting what you paid for it because that’s all that the market at the 2-year-old stage is willing to give you.”

In the past, this was conventional wisdom. Butting heads with the sheikhs and magnates to nab an expensive horse in the select sessions of Book 1 was an unnecessary and risky business decision. Doing so automatically set a difficult bar just to finish in the black at the 2-year-old sales, much less take home a significant profit.

However, Keeneland’s new catalog format has the potential to change that convention. Instead of a short, boutique group of offerings, this year’s first book has been expanded to four days, with 875 horses cataloged. As a result, the horses who might have previously sold in Books 2 or 3 will now be put side-by-side with the million-dollar yearlings.

With the elite horses now commingled among the upper and upper-middle tiers in Book 1, the new schedule has caused many buyers to reconsider when and how they will attack the sale.

“I don’t really know when I’m going to start stabbing or not,” said Texas-based Robert Brewer. “Usually, I get in the game in the second week or go to Book 3 and stay to [the last book], but now, the way [the format has changed], I don’t really know what I’m going to do. For so many years, it was pretty simple: I didn’t know if I should be there the first day. Normally, those aren’t my kind, but that could change now. I might have to be there from the get-go and wait for something to happen.”

A self-described “opportunistic buyer,” Joe Appelbaum of Off The Hook LLC said his buying strategy would not be affected by the success of the 2-year-old market or the increased competition, but he also noted that the unknown factor of the new catalog format could cause some good horses to slip through the cracks early on. If they do, he plans to be there to capitalize.

“It’s going to make us show up a little earlier, which is probably what Keeneland intended,” Appelbaum said. “There’s a bit of uncertainty, and you’re not sure what’s going to happen, so we need to keep our eyes open and be working. Plus, I think spreading all those horses out will probably open up an opportunity or two that maybe didn’t exist in the past, when [the select yearlings] were all concentrated right up front.”

Regardless of how it is laid out, the sheer bulk of the Keeneland September catalog offers plenty of opportunities for those willing to put in the time, research, and pedometer miles on the sale grounds to find them.

“We have a large selection of horses we’d like to get at the right price, and I think that’s the key – at the right price,” Appelbaum said. “With the reduced foal crop, there’s obviously less of an opportunity, so we have to go to more sales and try to turn over more rocks than we normally do.”