ZED Run: Common Purchasing Mistake #3: Not Applying Percentiles
This is the third in a series of articles that examine common missteps I have seen in the market when it comes to prices paid. In this series I dissect these errors and show why not paying attention to price could be seriously undermining your stable’s profitability.
If you missed my first article on how to value a horse, I recommend reading that first here.
If you missed the first in this series breaking down the most common error when buying horse, you can read that here.
If you missed the second in this series explaining how reported ROI is a deceiving metric that could be killing your returns, you can read that here.
For those that are caught up, let’s dive into it!
Error #3: Not Using Percentiles to Evaluate Price vs. Performance
Currently when you go to purchase a horse in the game the common method of determining what price to pay is to filter your search results in Hawku for the specific type of horse you are searching for, then compare the prices of those horses listed with those sold in the “sales” section of the website. While this is a good first step, the pricing data as it is currently laid out does not provide enough detail to evaluate exactly where on the price spectrum a particular horse is.
For example, glancing through the sales list does not allow you to break out the full range of prices paid broken out by minimums, maximums, and percentiles, nor does it allow for you to quickly change the filters for the sales so you can adjust your criteria dynamically in order to better compare the price of the horse you are evaluating against all sales of similar horses.
This shortfall is why I built out the Transaction Screener on my website. This article will briefly go over how to utilize the screener and what questions to ask yourself when evaluating a horse’s list price.
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The Transaction Screener
The Transaction Screener compiles the sales occurring on the Hawku marketplace and lays them out in a table so that you can quickly evaluate prices paid in the market. The tool allows you to screen by Bloodline, Breed, Genotype (Z#), Gender, ELO rankings, Win & ROI %, total races (free & paid), as well as Breeding Era (pre or post-update). This screener is updated daily and notifications go out on Twitter.
At the top of the Screener you are provided with the Minimum, 25th Percentile, Median, Average, 75th Percentile, and Maximum price paid for horses that match your screening criteria. Additionally, the Screener provides the ELO, Win %, ROI %, Total Races, and number of Paid Races that you should expect with each of those price points.
How Do I Use the Transaction Screener?
The Transaction Screener is designed to help you assess if the price you are paying for a horse is fair by answering the following question: “What do I need to believe to be true in order to be willing to pay this price?” If you buy a horse priced in the 75th Percentile, you are implicitly stating that you believe that this horse will outperform 75% of all horses of a similar genetics and racing ability. If you buy a horse with average racing statistics for an average price, you are agreeing that the horse is likely average and is priced correctly.
By filtering out horses that do not meet the criteria of the horse you are evaluating you can get a much more accurate picture of the prices actually paid by buyers and what high-level racing statistics you should expect to be associated with a particular price point.
What you are looking for are horses that are either fairly valued, they have racing statistics consummate with their list price, or have above average racing stats selling at a below average price.
For example, if you found a horse with 75th Percentile racing statistics selling at the average sale price, you could conclude that the horse is undervalued. Conversely, if you found a horse with average racing statistics selling at a 75th Percentile price, you could conclude that the horse is overvalued.
Let’s dive into a more concrete example to see how to make the Transaction Screener work for you and improve your buying decisions.
Example: Evaluating Nakamoto Exclusive Mares
Let’s say that you are interested in buying some Nakamoto Exclusive Mares for your stable because you plan to breed and sell foals with the highest-purity bloodline you can and maintain the Exclusive level by purchasing stud covers from Nakamoto Genesis Stallions available in the Stud Barn. You head on over to Hawku and see these three mares have just been listed:
These Mares are Z4–5, raced, and have prices ranging from 0.037 ETH — 0.099 ETH. That is a wide range of prices, so let’s now utilize the transaction screener to see how these prices compare against sale prices over the last few months.
Initial Criteria: Filter for Bloodline & Breed
The first step in the transaction screening process is to filter out for Bloodline and Breed since these are the primary drivers of the price of any horse.
This initial screen shows us that there were 1,584 transactions of Nakamoto Exclusives with an average sale price of 0.0683 ETH, Win % of 7.3%, and ROI of 0.4% across 73 races (14 paid). Comparing these stats against our Mares above, we see that based on price and racing statistics Morning Step and SOL FIRE may be overvalued while Swick Flick may be slightly undervalued.
We now want to add another layer of criteria to further refine the prices paid and get a more accurate picture of what we should be willing to pay.
Secondary Criteria: Genotype
The next level of criteria to apply is to screener Genotypes that are too high or too low, and thus skewing out results on both ends of the price spectrum. Filtering out for Z4-Z5 we now get the following:
We are now given 1,003 transactions involving Z4-Z5 Nakamoto Exclusives with an average sale price of 0.0708 ETH, Win % of 7.4%, and ROI of 0.4% across 65 races (13 paid). Given this new information we start thinking that Morning Step might be slightly overvalued, and that Swick Flick and SOL FIRE may be price appropriately, or even slightly undervalued.
We should now filter out any unraced horses and raise our race and Win % threshold to at least 20 races with 4% to match the lowest raced horse (Swick Flick) and lowest winning horse (SOL FIRE).
Tertiary Criteria: Race Data
Adding in the criteria of at least 20 races with a Win % > 4% gives us the following:
There were 446 transactions involving horses that matched our criteria with an average price of 0.0745 ETH, with Win % of 9.9%, and ROI of 0.8% across 130 races (28 paid). With this data we can determine that Swick Flick is slightly overpriced at just above the 25th Percentile given her 5.0% win rate vs the 25th Percentile Win % of 6.0% at a price of 0.0342 ETH. With her being overpriced we will either bid just below the 25th Percentile or skip this purchase all together.
Given that Morning Step and that SOL FIRE have double digit ROIs, we should add another layer of criteria to see what other positive ROI horses are selling for.
Additional Criteria: ROI; Gender; ELO; ETC.
Eliminating horses that have returned < 9.0% and >13.0% ROI gives us the following:
There were four transactions that meet all the criteria we input at an average sale price of 0.1060 ETH with a Win % of 15.3%, and ROI of 10.6% across 432 races (262 paid). With this data we can conclude that Morning Step is appropriately valued between the Median and Average price, which is exactly where her racing stats fall. No other horse has as low a Win % as SOL FIRE with this number of races and the lowest price paid was 0.0301 ETH for a horse with a 20% win rate. Therefore, we would conclude that SOL FIRE is overvalued and skip this purchase or bid as low as 0.03 ETH.
Given that we are looking for high-performing horses selling at discount or fair prices in order to maximize our ROI, we decide to purchase Morning Step and bring her into the stable.
There are an near infinite number of ways you can combine criteria to screen for transactions and derive whether or not a horse is under-,fairly-, or overvalued. This illustrative example above is presents a straightforward example of how to utilize percentiles to determine where within the range or prices your particular target horse falls. Remember, that all else being equal, err towards paying a lower price to increase the chances of getting your money back out of the horse either through racing or reselling into the market. A lower price point for a given level of performance will always be a safer bet than paying more for a horse of similar caliber. Using percentiles to understand exactly what level of performance you should expect with a given price point is critical to avoid overpaying to maximizing your return.
If you have questions on how to value a horse or are interested in us doing an analysis for you, please contact us at RainierRacingCo@gmail.com and we will get back to you within 24 hours.
Pricing & Valuation Resources
Rainier Racing Co. — Check us out to get market data and read our ZED Run Market Reports.
Hawku — Use to find new listings, screen for similar transactions, and review racing statistics.
Know Your Horses — THE place to do a deep dive on your horses and other stable owners.
Zed Ranks — Great place to get a rough estimate of a horse’s value.
StackedNaks — See your horses statistics ranked against other in the game.
ZED Run — The game!