Value(d) Opinions

Another bulging mailbag today, with some differing opinions on a few topics. A good thing. It would be a boring world if we all thought the same.

First the merit, or otherwise, of the Sports Betting Professor. Talkbet and Anonymous(1), as well as independent review services, rate this service highly, but Anonymous(2) isn’t so sure but Anonymous(2) bases his objection on the appearance of the home page rather than the results, and the expression “don’t judge a book by its cover” comes to mind. (He also loses credibility with his claim that I am “suddenly into Rugby” when my interest in the Super 14 was mentioned as far back as last May!)

Anonymous(7) queries the wisdom of using tipsters, and in 99% of cases, I have to agree. I certainly would never touch them for horse racing as JP does, but I am curious about the statistically based ones which appear to have a winning record, and which are reasonably cheap! I started subscribing to Football Elite, because their results did look impressive, they are reasonably priced, and I was curious about the teams that were being selected, and why. The results have been (slightly) profitable to level stakes, but it also gave me the nudge to start following the top leagues in Spain, Italy, France and Germany with the Elo ratings which, may or may not, prove to be profitable, but at least it’s (to me) interesting.

The Sports Betting Professor has piqued my interest because it is a statistical system, and again is reasonably cheap. For both of these services, the worst that can happen is that I lose a few quid, but there’s the possibility that the tips will be possible, or that they will trigger some idea that becomes lucrative. Either way, for me it’s cheap entertainment.

And now back to value. Anonymous(5) thinks I am completely wrong. He writes: “When you invest you are paid to hold stock as an owner of a company. The company invests your money and produces a return. The longer you hold it the more chance you will make money.”

I hold shares in a number of companies, some of which pay dividends (presumably what was meant by “you are paid to hold stock”) but not all companies do. Shares in the non-dividend paying companies were purchased for their growth potential, in the same way that I might back Spain to win the World Cup. Alternatively I can sell shares that I don’t have or lay Spain in the World Cup. In both cases I am investing because my opinion is that the current price offers value, that at some point in the future I will be able to trade out of my position for a profit. If my entry price wasn’t value, then long-term, this strategy is a losing one.

It’s also important to understand that shares don’t necessarily have to be held for a long time, but can be bought and sold within seconds. In the heyday of day trading, maybe ten years ago, it seemed like everyone was doing this. Very similar to in-play trading on sports, except that I could never understand how I thought I might have an edge over the insiders with far more money and knowledge than I could ever have on the outside.

I tried trading options for a while, but even when I was working in the City for a merchant bank and was able to trade with reduced costs, it was all just gambling. However much I read up on Rolls Royce, I was never going to have a better idea of their true value at any point in time than someone who lived and breathed Rolls Royce.

I digress. As for the statement “the longer you hold it the more chance you will make money”, this is undoubtedly true some of the time, but many companies collapse, or are taken over (just take a look at the original 30 companies of the FT 30 index at the bottom of this post), and any increase in the value of your shares needs to be measured in real terms accounting for inflation. Marks and Spencer may go up 10% in 10 years, but if the interest rate on your deposit account is paying 5% a year, that M&S purchase wasn’t value by most people’s standards.

Anonymous(3) – aka Dave posted a good comment, repeated here in its entirety:

Have enjoyed reading your blog for a number of years now.

Your current articles about value are certainly thought provoking. I think that it is very difficult to actually define value in investing/betting as everybody has a different idea of what value actually is.

If you look through the history of the stock markets, there are many examples of people who have made (and lost fortunes).

You will no doubt remember reading about Hetty Green in New York

(I recall you wrote a small article on her a while back). She did inherit money, however her aim was to compound her money by 7% pa. This was done through bonds equities even jewellery. Buying when everyone was selling and selling when people were buying i.e. going against the crowd. If you go to the other extreme and look at Larry Livermore (the boy plunger)he was only concerned with market direction (the line of least resistance)and in his lifetime he made and lost many fortunes trading those directions.

Turning to the betting markets up until the advent of Betfair it was estimated that about 5% of gamblers made a profit every year, however, with the popularity of Betfair I would suggest that the 5% figure has increased because the laying of sporting events is now possible.

I recall reading an interview with Harry Findlay who estimated that if you made 9% on turnover, then you were doing very well.

Probably the biggest difference between stock markets and betting markets, is time scale. In the stock market a share can be researched and if it meets your investment criteria you buy the share. If after buying the share it drops say 20% its now a dog, however if you decide to hold the share and after say 18 months its 50% above your purchase price you are very relieved and probably consider yourself the next Warren Buffett, however when holding the share where do you differentiate between good and bad value?

With sports betting/trading like every form of investment/trading the real value is in the amount of effort and methodology that is put into carrying out your research and your knowledge of the market you wish to participate in. In addition discipline is required to stick to your methodology.

After my ramblings I would suggest that value cannot be measured because being individuals we all have an interpretation of values.

“We all have an interpretation of values”. I like this comment. Our understanding of value depends on our time-frame, our investing ‘horizon’. The example of buying a share at and it drops 20%, before recovering and almost doubling is a good one. Think of a football match where pre-game the home team is 2.0. Is this price value? As the game stays goalless, the price drifts out, before they score and the game ends 1-0. Who was that 2.0 value for? Not for the five minute trader, but it was arguably value for the punter or for anyone with a view to trading out after the first goal. But the price moved out to say 3.0 before the goal arrived, so was 2.0 ever value? Wasn’t the value at 2.98? Was 2.0 value if the home side hit the woodwork six times, have 30 shots on goal and 25 corners and the game finishes 0-0? Good comment Dave.

To Anonymice(4 and 6) and anyone else who seems to think I need to post up my P&L statement, it’s not going to happen. This blog is not a tipping blog, it is not a results blog, it is not a horse-racing blog, it is not a “look how many millions I am making” blog. It is a general blog about the world of sports investing, in particular about the betting exchanges, and my P&L is irrelevant and totally boring and meaningless to anyone but me. Read my post on perspective if you don’t understand why the amounts won or lost are irrelevant. What ever amounts I posted up, some people would consider it a lot, (and bragging), and yet to others it would be a waste of time to spend so much time to ‘only’ make that amount.

Finally for Anonymous(6) who wrote:

“Cassini is just some dullard blogger taking thru his arse with his own perceived air of authority. Most of his value bets lose, I read quite a few blogs and like Cassini all the losing ones avoid talking about the real aim of gambling their pnl”

A couple of points –
a) If this blog is so dull, why are you reading it and commenting on it?
b) Most of my value bets can lose. In fact, it’s to be expected when backing at odds against.
c) While the real aim of gambling is certainly the P (there is no L in my gambling P&L), the aim of a blog isn’t.

And yes, Anonymous(7), I have certainly been called pompous many times - arrogant too, but usually only by my parents, siblings and close friends who have now learned not to take me too seriously.

Finally, finally, another probable bullseye for the Elo predictions tonight with Liverpool triumphing by the expected three goals... Rest assured I shall confirm either way if (when) I get my data back!

The original 30 companies in the FT 30 index: Associated Portland Cement • Austin Motor • Bass • Bolsover Colliery • Callenders Cables & Construction • Coats • Courtaulds • Distillers • Dorman Long • Dunlop Rubber • Electrical & Musical Industries • Fine Spinners and Doublers • General Electric Company • Guest Keen & Nettlefolds • Harrods • Hawker Siddeley • Imperial Chemical Industries • Imperial Tobacco • International Tea Co. Stores • London Brick • Murex • Patons and Baldwins • Pinchin Johnson & Associates • Rolls-Royce • Tate & Lyle • Turner & Newall • United Steel Companies • Vickers-Armstrongs • Watney Combe & Reid • F. W. Woolworth & Co