11/02/2016 5:20PM

Klaravich Stables gets three shots at Breeders' Cup breakthrough

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Barbara D. Livingston
Favorable Outcome (left) and Practical Joke are two of Klaravich Stables's Breeders' Cup entrants this year.

Seth Klarman is one of the most successful investors in the world, so much so that he’s earned the moniker “The Next Warren Buffett.” In racing, the stock of his Klaravich Stables also is on the rise and could potentially peak at this weekend’s Breeders’ Cup at Santa Anita.

Klarman, who races his horses with William Lawrence, has three runners in this year’s Breeders’ Cup: the unbeaten Practical Joke (Juvenile), Favorable Outcome (Juvenile Turf), and Money Multiplier (Turf). A win would not only be his first in a Breeders’ Cup race – Klaravich is winless with 12 previous starters – but would put the bow on a tremendous year for the stable.

Heading into the weekend, Klaravich is tied with Stonestreet Stables for the most graded stakes wins (eight) by an owner. Overall, Klaravich has won 49 races, and its $4.5 million in purse earnings are fourth-best in North America.

In the business world, Klarman has a most impressive résumé. He is president and chief executive of the Boston-based Baupost Group, one of the world’s largest hedge funds. Forbes places Klarman’s personal net worth at $1.3 billion. In 1991, Klarman wrote a book on investing called “Margin of Safety” that has since gone out of print and can only be purchased online. On Wednesday morning, copies of the book in varying degrees of wear were being offered on Amazon.com for between $888.91 and $5,400.02.

Klarman also is chairman of the board of The Times of Israel, a Jerusalem-based online newspaper. He is extremely philanthropic. He chairs the Klarman Family Foundation that his wife, Beth, oversees, and he sits on several charitable boards, including that of Facing History and Ourselves, a nonprofit international educational and professional development organization.

Klarman caught the racing bug early in life, growing up three blocks from Pimlico Race Course in Baltimore, often going to the track after a day of high school to catch the last few races.

“I was handicapping from an early age, and I think it’s because I love to solve puzzles,” Klarman, 59, said in a rare interview with a racing trade publication. “I love to solve puzzles of the stock market or Sudoku, and I love to solve the puzzle of who’s going to win a horse race. Pimlico was extremely speed biased, so the puzzle was figuring out how much speed was there, was there a lone speed, and how was that horse going to do? I liked handicapping what was going to happen in front of me in the next few minutes.”

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Klarman said he and a friend bought a horse in the late 1980s, but that venture did not work out well. Through another friend, Jess Ravich, Klarman got involved in a partnership with several other owners and enjoyed a modicum of success. From there, Klarman and Ravich formed Klaravich Stables. Ravich left the partnership in 2003. Shortly thereafter, Klarman brought in Lawrence, a businessman from Albany, N.Y., as a minority partner.

In 2004, Klarman and Lawrence made it to the Kentucky Derby with Readthefootnotes, who finished seventh but came out of it with a knee injury and never raced again. That was one of several unfortunate incidents Klarman has endured in the sport.

In 2003, Federal Funds injured a tendon while finishing second to Ten Most Wanted in the Illinois Derby. In 2012, the 2-year-old Spurious Precision suffered a fatal injury during a workout after winning his first two starts impressively at Saratoga. In 1998, a week before the Breeders’ Cup Mile, Subordination broke an ankle after stepping on a rail spike at Churchill Downs.

“Of course it weighs on us when a horse gets hurt,” Klarman said. “Life dishes out happy events and unfortunate events. I think you need a pretty thick skin in this field.”

Klarman has employed a number of trainers, including Tom Amoss, Al Stall, Teresa Pompay, and Rick Violette. The fortunes of Klaravich Stables moved to another level when it joined forces with trainer Chad Brown in 2008. Brown now has the bulk of Klaravich’s horses, including Practical Joke, Favorable Outcome, and Money Multiplier.

“We really were fortunate when [agent] Nick de Meric referred us to Chad Brown,” Klarman said. “To get an up-and-coming star early in his career and someone you really have a strong personal relationship with was as fortunate a development as we could have had. We obviously had success before Chad, but we’ve had a completely different echelon of success since we’ve been with Chad.”

In the last few years, Klarman has put Brown in charge of selecting horses to buy at auction.

“If someone is acting as an agent for me and picking horses at a sale, I’m investing a huge degree of trust in that person,” Klarman said. “Unfortunately, it’s a sport that has earned its reputation for having some participants that aren’t trustworthy. I have never had cause to doubt any of my current trainers. You won’t find people, for example, of higher integrity than someone like Chad or Rick Violette.”

Though he has the means to do so, Klaravich doesn’t buy seven-figure horses at auction. His three Breeders’ Cup runners cost a total of $800,000.

“We try to be pretty conservative,” Klarman said. “We’re not buying million-dollar horses, we’re not all in, hell bent on achieving our goal. We’re trying to be extremely disciplined buyers and willing to be extremely patient. Those are the type of characteristics that I think one would follow in any field to be successful. We’re trying to get smarter, trying to figure out niches where there might be better opportunities. We’re looking for ways to be in the sport in the most sensible way possible.”

Practical Joke, a $240,000 son of Into Mischief, is 3 for 3 with Grade 1 victories in the Hopeful and Champagne. In 2012, Shanghai Bobby won the Juvenile after winning the Hopeful and Champagne.

Favorable Outcome, a son of Flatter who brought $300,000, ran third in the Champagne. He will be making his turf debut in the Juvenile Turf.

Money Multiplier, a $260,000 yearling purchase, is only 3 for 14 but ran a very good second to Flintshire in the Grade 1 Sword Dancer on Aug. 27 at Saratoga. Flintshire, owned by Juddmonte Farms and the potential favorite in the Turf, also is trained by Brown.

“I think he might be right there with Flintshire,” Klarman said. “They work together, and Chad said they’re pretty close right now on ability. We’re running against Flintshire because we think Money Multiplier might be the best horse, especially with the way he’s been improving, and it’s no shame to run second in a Breeders’ Cup race. It makes no difference to me that Flintshire is in Chad’s barn. No matter who trained him, we would still have to beat him.”

Brown said Klarman has added to his life both personally and professionally.

“He’s obviously legendary in the investment world and on top of that a really good person, probably one of the best people I ever met in my life and certainly one of the smartest as well,” Brown said. “I’ve learned a lot from him about life; I’ve learned some things from him that I applied to run in my business. He’s very enjoyable to work with in the horse business. I think he’s building a very, very strong stable. I think he has a good plan, and he’s finally getting some good luck to go along with it.”