Monday 26 February 2024

Another Perfect Final

Betfair's official Starting Price for the League Cup Final between Liverpool and Chelsea yesterday was 3.8, while the 'official' odds I record using the Odds Portal average price was 3.73.


For the Under 2.5 markets, an alternative - lower volatility - way of investing in these selections, the most traded price on Betfair was 2.52 with 2.4 the average on Odds Portal.

A winning result for both investments, with another 'perfect' draw, and the ROI on the last 20 League Cup Finals increases to 56%, and that from the Under 2.5 (only 16 Finals available) to 19% using my conservative numbers which should be easily beatable in practice.  

In the seven Finals without a fair-priced team at odds-on, the Draw has come in five times, an ROI of 148%, and in the 11 "Big 6" Finals, the Draw has won 7 times with an ROI of 133%.

I've updated the Sacred Manuscript and hopefully as well as subscribers, some (if not many) of you followed my advice from last week regarding this match. 

Saturday 24 February 2024

Berkshire Hathaway Annual Letter 2024

The 2024 annual letter to Berkshire Hathaway shareholders was published this morning, and as some readers will know, I both own shares in this company and often comment on the newsletter's contents.


For a traditionally rather boring stock, it's been on something of a tear this year, up 17% already, second only behind my less boring Bitcoin "investment" (+31.7% YTD) in my individual holdings. 
As for the newsletter, unsurprising Warren Buffett opens with a tribute to his longtime partner Charlie Munger who passed away last November just shy of his century, crediting him with being the “architect” of the present Berkshire, while "I acted as the 'general contractor' to carry out the day-by-day construction of his vision."

Buffett introduces a sister, Bertie, and makes an observation about her that many sports bettors would be well advised to heed:
She is sensible – very sensible – instinctively knowing that pundits should always be ignored. After all, if she could reliably predict tomorrow’s winners, would she freely share her valuable insights and thereby increase competitive buying? That would be like finding gold and then handing a map to the neighbors showing its location. 

As he often does, and again readers will know that I have long followed this strategy, he extols the virtue of owning US stocks writing:

I can’t remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good. The Dow Jones Industrial Average fell below 100 on that fateful day in 1942 when I “pulled the trigger.” I was down about $5 by the time school was out. Soon, things turned around and now that index hovers around 38,000. America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one. 

The index is actually above 39,000 right now, and while I prefer to track the broader S&P 500 Index, I'm sure there will be a lot of articles written when the 40,000 level is reached Started in 1896, it's not quite the OG of indexes, but it's second behind the Dow Jones Transportation Average which started in 1884. 

Buffett is very much a proponent of leaving things alone when they are going well, and talks about the holdings in Coke and American Express that Berkshire Hathaway have held for many years:

During 2023, we did not buy or sell a share of either AMEX or Coke – extending our own Rip Van Winkle slumber that has now lasted well over two decades. Both companies again rewarded our inaction last year by increasing their earnings and dividends. Indeed, our share of AMEX earnings in 2023 considerably exceeded the $1.3 billion cost of our long-ago purchase. 

And of interest to me with my new focus on dividends, Buffett adds:

Both AMEX and Coke will almost certainly increase their dividends in 2024 – about 16% in the case of AMEX – and we will most certainly leave our holdings untouched throughout the year.

The newsletter touches on a variety of topics including climate change, mental health and the challenges of hiring employees in the rail industry and as always, the 17 pages are worth a read in full - it can be found here

The annual review I mentioned yesterday went about as expected given the "financial headwinds" that have been mentioned, presumably to dampen expectations. It was no secret that senior grade levels would not be receiving any merit increases this year, and the bonus was down about £20k from last year with the options and RSUs set the same as 2023.

The tone of the conversation was all rather negative regarding the future and when job cuts were hinted at, I took the opportunity to express an interest in negotiating a voluntary severance package which he will be taking to HR. 

Exciting times. I went out for my daily walk immediately afterwards, always good for processing thoughts and clearing your head, and I felt very positive about everything. With the US S&P 500 later closing at new high and my Royal London pension statement also up, it was a new high again for the personal spreadsheet so it's all good. 

If no agreement on severance can be reached, or no offer is made, it's not a big deal. Given my tenure, I'll get at least six months pay if / when they involuntarily sever me and by the time that date comes around I'll have worked a few more months anyway, and as I've mentioned before, it's very comfortable working from home so that wouldn't be a big deal anyway. 

Friday 23 February 2024

Cups, Major Leagues and 673 Days

weirimdi followed up on his teaser of a comment regarding Cup competitions with some more data and some additional observations.

He wrote: 

Hello again, thank you for responding to my comment in your recent post.
As you suggested I looked at the ROIs of the respective leagues.
Here is a link the screenshot. https://prnt.sc/wAmY8WxJd54D
In addition to that you might want to look up the performance of major leagues in the Champions League when they play as an Away Team.
https://prnt.sc/u5y1fIA954AO
Another interesting angle here is that most of the Home Teams are underperforming. I included Group Stages/Qualifier/Knock Out Stages for CL and for the Cup selections too.

It has the data onwards based on maximum odds from betexplorer.com.
Thanks for the interest!
I might have mention this before, but I happen to love this stuff so thank YOU for the comment. The Cup data shows some interesting returns - Turkey's Cup with an ROI of 15.7% from 2000+ matches for example. 

As for the comment about teams from the major leagues when playing Away in the Champions League, yes I do track this although my idea about the 'major leagues' may differ since the highlighted ones are England, France, Portugal and Spain. 

Here are my numbers for the Big Five Leagues of England, France, Germany, Italy and Spain showing that opposing these teams (back the Home team if they are a Big Five club / back the Draw if not) is generally a good idea: 
More on this topic to come, possibly after the Round of 16 is complete and we have a little more data but - spoiler alert - backing an Away team from Germany, Italy or Spain is generally not a good idea with an ROI of -14%

Japan's Nikkei 225 index made a new high yesterday after 34 years, which is almost as long as the Israelites were wandering about in the wilderness, eating quail and manna. The S&P 500 index also closed at a new high yesterday, after recovering from a two year slump last month, and my own personal drawdown came to an end just shy of two years, (673 days to be precise) since a last high was reached on April 20th, 2022. 

The longest drawdown for my sports investing accounts was a mere 227 days back in 2007 but the mind is a funny thing and in many ways that felt a lot worse. I made a stupid mistake on New Year's Day and lost £5,000, what at the time seemed like a lot of money. As I've written before, it took me until August to recover, but I learned a valuable lesson from my error.

The new high comes at a good time psychologically. I have my annual review later today, and while any merit increase at my age is of little interest to me, I am much more interested in the size of my annual bonus and stock options. Perhaps not as interested as my wife, who has plans for new flooring, showers, cabinets and kitchen...  

With February extended by a day this year, there are still five trading days where it could all go horribly wrong, but I'm hopeful of ending the month at, or close to, a new high. 

Wednesday 21 February 2024

Second Leg When Up / Down By 3+ Goals

With an early second leg match today in the Europa Conference League, and the remaining 15 matches in this tournament and the Europa League tomorrow, I thought a look at how the market views second leg matches - in ties that appear to be decided - might be of interest.

The data below is from the Champions League, Europa League and Europa Conference League games going back to the 2003-04 season. 

In matches where the first leg resulted in a Home win by three goals or more, the market overrates the probability of the Draw in the return game, and thus offers value on both the Home team and the Away team. 

I suspect a couple of factors are at play here - the Home team doubts their ability to recover from such a large deficit whatever the club's public pronouncements may say, and that the Away team feel that the job is done, whatever their comments might say. 

Both teams may also be tempted to make some changes to their starting line-ups making the game more difficult to evaluate.

As much as I enjoy a nice Draw, I'm quite selective in the profile of matches I select from, and the results suggest that opposing the Draw in these matches is a solid strategy. 

When a goal is scored, and only two of 65 such matches have finished 0:0, the tie is either effectively over or, depending on how much time is left, a consolation goal that the Away side aren't too concerned about.

Of those 65 matches, only 10 finished as Draws and in matches where one team was a fair-priced odds-on favourite, just two of 22 ended as a Draw. 

It's a similar pattern in the reverse situation, where a second leg Home team comes into the game with a 3+ goal advantage. Just seven of 46 such matches end as Draws, three being 0:0 draws, with profits to be found backing both Home sides and Away sides. 
Don't get too excited about the large ROIs when the sample size is so small, but definitely something to keep an eye on.

Moving on, and with the NBA at its mid-season All-Star Break, it's a good opportunity to catch up on how the systems for that league are faring so far. The basic system is up just 2.56 units (an ROI of 0.8%), with the more selective sub-systems up 5.17 units (4.7%) and down 5.82 units (-14.5%) for the smallest of profits, boosted by the Totals system which is currently up 5.5 units (3.9%).  

It's a similar story of meagre profits in the NHL which had its mid-season break a couple of weeks ago. Here the basic system is up 2.52 units (0.7%) but it's clear that the days of double digit returns on our investments are a thing of the past:
Since 2015, the Basic ROI is just 1%, with the Premium currently at 3.3%

Sunday 18 February 2024

Cups

weirimdi had a comment on my last post which was very interesting. He writes:

Hello, inspired by your work I collected the data for main international domestic cup tournaments.
The results are impressive.

I analyzed the data from main competitions in Europe, Asia and South America.

I looked for the results from 2017/18 up to the latest one this season.

The best performing ones:
Turkey +160 Units (mostly in early stages, but there might be a reason for that)
Korea +70 Units
Japan +50 Units
French Cup +100 Units
Spanish Cup +75 Units
Now I started looking at data depending on the respective leagues of the teams involved.
I think there are some angles that are worth digging deeper into.

Keep up the great work.

I love it when my posts trigger someone to research some of my thoughts and ideas further. weirimdi doesn't mention ROIs, but in fewer than seven full seasons, those unit totals are quite impressive. 

As readers will know, my focus for club football tends to be on the big European Leagues, the knockout stages of the European Club competitions, as well as the domestic English Cup competitions and end of season playoffs, but perhaps I need to broaden my horizons and take a look at some of the national cup competitions around the world. 

My reasons for not looking at other countries before are mostly a, possibly incorrect, feeling that the 'cup' competition is much less highly regarded than the League. 

In France for example, four recent finals (since 2000), have featured a club outside of the top two divisions there, something which seems rather unlikely to occur in the FA Cup despite Maidstone United's valiant effort so far in this season's competition, but the cup competitions in other countries might be worth a look based on weirimdi's research. 

Thank you weirimdi and feel free to share any more findings.

Right now we're in the middle of the European Competition knockout stages which are always interesting with some edges to be found. The Champions League is in its Round of 16 stage while the Europa and Europa Conference competitions are in a knockout round for a place in the Round of 16. It's only been in place for two seasons before this one and is effectively a Round of 24 with 8 teams receiving a Bye. While the results should be in line with those of the Europa Leagues former Round of 32, this may not turn out to be true as we gather more data. 

Back to England and the League Cup Final is just ahead. No surprise that the two finalists are from the Big 6 (11of the last 20 - this year Liverpool and Chelsea) nor that this is the second time these two clubs have met in this final in three seasons and the third in the last 20.

Backing the Draw in League Cup Finals has an ROI of 44% and in "Big 6" finals the ROI is 119%


Tuesday 13 February 2024

International Draws Update

Although neither final in the 2023 Africa Cup of Nations and the AFC Asian Cup resulted in a win, both competitions did end up in profit, and if you bet the Draw in third-place playoffs you would have had a winner.


In Asia the profit from the 15 knockout matches was 3.13 units, an ROI of 21%, while in Africa the profit was a more modest 0.38 units, an ROI of 3%

The Africa Final was one of those rare matches where the favourite was the Draw, and while the sample size in International matches is small, it's a scenario where I don't feel the Draw is likely to be value.

In the 9,000+ EPL matches for which I have prices, not a single one has ever had the Draw as favourite, I wrote a post on the Draw as Favourite more than 10 years ago in which I attempted to explain why this scenario should never be the case. 

I did mention that where special circumstances exist, e.g. a Draw would suit both sides, the Draw could be favourite, but mathematically this shouldn't be true and in a knockout tournament, this situation wouldn't apply anyway. 

Some leagues do have the Draw as favourite relatively frequently, for example in the Spanish Second Division has had 131 such instances in the past six seasons, but backing the Draw in these matches would have lost you 5% of your money, which is worse than the 1% loss when blindly backing the Draw in all matches.

The International elimination games where the Draw has been favourite are:
None of the four matches involving African countries ended as a Draw.

Back to third-place playoff games, and with the D.R. Congo v South Africa match on Saturday finishing 0:0, backing the Draw in these games in International tournaments is now slightly in profit both in Africa and overall, which is somewhat surprising given that none of the combined 11 World Cup and Copa America third-place games have never ended as a Draw. 

The overall record for all active international competitions (elimination matches excluding the Draw when favourite) now stands as shown here:
Why the CONCACAF Gold Cup is such an outlier is an interesting question. I'm of the opinion that it's due to the teams being relatively imbalanced with a 'Big Two' of Mexico and the USA - who between them have won 16 of the 17 tournaments and comprised seven of the Finals - and a chasing trio of 
Panama, Canada and Costa Rica.

When these five countries meet in elimination games, the results are interesting and backing the Draw is actually quite lucrative, with an ROI of 50% from 20 matches. There was also a draw in the 2015 playoff match between the 2013 and 2015 Gold Cup winners - you guessed it, USA and Mexico - for a place in the 2017 Confederations Cup, so the results are actually slightly better but I don't have any odds for this game. 

There's no Gold Cup until next year, so while it might be tempting to skip this tournament completely, it may be worth keeping an eye out for the matchups just mentioned.

Friday 9 February 2024

Asia and Africa Finals

The 2023 Africa Cup of Nations and the AFC Asian Cup both come to an end this weekend. 


In Asia the Final is between hosts and favourite Qatar and Jordan while in Africa hosts and underdog Ivory Coast meet Nigeria.

Finals of International Tournaments are generally good for the Draw, with the eight Africa Finals producing 1.83 units of profit  and the three Asia Finals up 3.31 units. The combined ROI from this small sample size is 47% and for all 43 International Finals it is 28%.

This is the first Final in the spreadsheet where a host nation has been the underdog, and the fifth where one has been the favourite - and in none of those previous four has any side scored more than one goal. 
Africa also has a third-place game coming up, D.R. Congo v South Africa, but these are not knockout matches and overall, backing the Draw is not historically profitable with the 30 matches showing an ROI of -4%. However, in matches where the Draw is the second favourite, the ROI is 15%. Backing the favourite has an ROI of 42% in matches where the Draw is third favourite. 

Following this, the NFL season also comes to an end with the Superbowl in Las Vegas where the San Francisco 49ers are 2 point favourites to beat the Kansas City Chiefs.  

As I wrote last year, it's very hard to find an edge in such a big game. This is the 58th Superbowl and of the previous 54 (excluding one pick 'em in 2015 and two pushes) Favourites are 28 - 26 ATS while for the Totals it's a 28 - 28 split between Over and Under. This is the Chiefs fourth Superbowl in five seasons and the second time they've played the 49ers having beaten them 31:20 in 2020.