About 1pm yesterday, I saw something unusual. I was watching the Racing.com coverage of the Melbourne Cup. All of a sudden the trackside commentators picked up an interview with one of the owners.
This wasn’t a usual name you’d see by the track like Waller, Hayes or Waterhouse. It was Lloyd Williams. Now, Lloyd Williams is one of Australia’s most successful businesspeople. He is a property developer and investor. His personal fortune was somewhere around $670 million in 2012.
Williams made a packet when he sold his stake in Crown Casino to the Packers. He’d been close to the Packers before then. He (along with David Gonski) was a co-executor to the late Kerry Packers will.
But it’s the horse racing industry where Lloyd Williams has had a tremendous impact. And yesterday with his horse Almandin, Williams claimed his fifth Melbourne Cup.
Five Melbourne Cup wins is an anomaly in itself. He’s now won more Melbourne Cups than any other owner. But it was the interview with Lloyd Williams trackside that was unusual. You see, Lloyd Williams hasn’t been to a Melbourne Cup in about 30 years.
While he’s very well–known, he almost never actually goes to the races. He’s an enigma. A mystery. His presence trackside is unusual — in fact, it was unheard of.
And yet there he was.
Getting ahead of the average punter
My brother was sitting next to me. We turned to each other and he said, ‘Are you seeing what I’m seeing?’
‘You bet I am,’ I replied.
‘Williams NEVER goes to the Melbourne Cup. You know what that means?’
‘He must be bloody confident that he’s got a winner. Regardless of what he says, he must be almost certain he’s got this one.’
It was at that point we agreed you would almost put the house on one of Lloyd Williams’ horses winning the Cup. This was a good two hours before the race started, I might add.
Of course there’s no certainty in horse racing. It is gambling, after all. But Williams’ presence trackside was perhaps the strongest indicator we’d seen for a winner in the race.
Of course, the difficulty was which one? Williams had four horses in the running, Bondi Beach, Almandin, Gallante and Assign. Of the lot, Almandin was probably the best.
Unfortunately for us, we’d already put our bets down for the day. And like all good gamblers we’d set our bets and left it at that. But we agreed we’d kick ourselves pretty damn hard if Almandin won. You simply don’t see Lloyd Williams trackside. It was no omen, it was a signal that something was going to happen.
That’s exactly how it played out. Admittedly, Almandin only won by a nose. But it still won. As soon as it had crossed the line I turned to my brother and said, ‘Punch me, just punch me.’
Thankfully he didn’t. And thankfully we’d clawed back some cash with the place-getter Hartnell, anyway. But the gains were there to be had. We saw the signal. We just didn’t pull the trigger on it.
A few days earlier up at our conference, The Great Repression, I got chatting with a few attendees. Someone suggested to me that small and microcap stocks could be a bit like horse racing.
They were saying that the money they were investing was a bit of ‘punt money’. Their hope was that the punt would pay off and they’d make some tidy gains from these tiny, exciting stocks.
I can see their point of view. But I had to disagree. Investing in small-cap stocks is a far better place to put your money than on the horses. However, picking stocks that can go from zero to a ten-bagger isn’t all that easy.
Sometimes picking stocks that can make life-changing gains can be as hard as picking a winner in the Melbourne Cup.
Unless you see a signal which turns the risk substantially in your favour.
How to tip the odds in your favour
As I said before, seeing Lloyd Williams trackside was a signal. It wasn’t an observation about the fitness of the horse. It wasn’t about the form of the jockey. These are two pieces of information that most people have access to.
Seeing Williams trackside was a piece of information that not everyone could see. It wasn’t hidden, though. It was a public place, and Williams wasn’t hiding. But unless you either saw him in person (and knew who he was) or you were watching the broadcast, you simply wouldn’t have that information.
Those who did got a competitive advantage. Nothing illegal, nothing wrong, just a minor advantage over the rest of the punters.
This competitive advantage can also find its way into the stock market. Again, it’s not inside information. That would be illegal. It’s not a big corporate secret either. It’s simply a signal, a piece of information available to everyone, but that most people miss. Unless you pick through all the information available, or you know what it is you’re looking for to begin with, most punters can simply glance over the top and miss the opportunity.
But these signals can be there right in front of you. If you know how to identify them, then you can stand to profit while the average punter misses the boat. I know this because I see signals in small-cap stocks all the time. Some of them have led to incredible gains in a very short space of time.
Like one stock that I found in May this year that’s now up 490%. Its signal was a new development in the progression of their proprietary technology. The mainstream missed it. So I told my subscribers to go for it.
Three months later the mainstream caught on and the stock bolted. It did an ‘Almandin’. It swooped off the bend from near the back of the field, caught everyone by surprise, and walked away with the prize money.
Stocks are risky, like horse racing. But as I say, if you can see the signals before the average punter does, you can tip the odds in your favour.