Betting on sports to make a profit is one of the toughest roads a recreational sports fan can take. Far too often the inexperienced bettor is taken down by the sportsbooks and ends up deep in the red. There are many reasons for this sad outcome but one of the most common is, despite their better than average knowledge of sports, the recreational bettor simply ‘buys’ their bets at the wrong price.
Much like the stock market where buying a great company at an expensive price is a one way ticket to disaster, so too is wagering on a sports market when the potential return simply doesn’t match the risk.
What is Value Investing?
Value investing is an approach to investing that focuses on buying stocks (or any other asset classes) that are trading at a price lower than their perceived value based on some kind of fundamental analysis. That is, the investor purchases the stock with an expectation that in the near future the price will change and they will already be in front.
According to Investopedia if you know the true value of something you can save a lot of money when you buy it on sale. They use the example of a TV. A savvy investor would not pay full price for a TV knowing that several times a year the same TV goes on sale. Why not wait for the sale and acquire the same screen size, picture quality and all the features for a price much less than what it is today.
The value investor uses the same principal when buying assets. They make money by finding individual assets that are incorrectly priced and buying them.
The question still remains; can sports bettors use these same value investing principles when ‘investing’ on sports? The answer is an emphatic yes. Read on to find out how!
The Difference Between Price and Value
The words ‘price’ and ‘value’ are often used interchangeably but in reality they mean two vastly different things. Essentially price is what someone is willing to pay and value is what something is actually worth.
Clearly there are times where the value is higher than the price and there are just as many times (probably more) where the price is considerably higher than the actual value.
For example imagine a situation where the Los Angeles Rams are -130 (1.76 decimal) moneyline favorites against a less fancied opponent. After some deep analysis of recent form, previous matchups, and team selections you, as the bettor, have them more likely to win this game 2 out of every 3 times. That kind of strike rate is indicative of -151 (1.66) odds. If your ‘read’ is correct then the price of -130 represents value and is exactly the type of circumstance that a value investor would buy.
That is, the potential profit from the bet is 13% higher than what it would be if the bookmakers had the Rams at the odds the bettor believes they should be. 13% is significant when the margin between winning (profitability) and losing long term is so small. Of course the Rams could lose this game but as a bettor you stand a much greater chance of being a winner long term if every time you bet you ‘get your money in good’.
What Can Sports Bettors Learn from the Value Investors Philosophy?
There are four golden pieces of wisdom that sports bettors can borrow from successful value investors. These are:
| The Four Golden Value Investing Philosophies for Sport Bettors | |
| 1 | Price and Value Stay in Step Most of the Time |
| 2 | Don’t Follow the Herd (Timing is Everything) |
| 3 | Be Rational in an Irrational Market |
| 4 | Be a Price Taker Not a Price Maker |
1. Price and Value Stay in Step Most of the Time
Contrary to the belief of the recreational bettor who simply must have action of every game, most of the time the price on offer is reflective of the real chances of winning. This is because the overall efficiency of sports betting markets is pretty good. Particularly on sports where large volumes are bet. This is because often (not always) as money flows into the market, small price adjustments will occur and over time, the price will settle on the consensus of the betting public.
Always remember: The majority of the betting public lose over the long term so consensus is not always the best indicator. Some savvy bettors will actively fade the public. While we don’t advocate a one size fits all approach to betting, it’s worth checking out how to fade the public.
The skill of the value investor is watching closely for the market where price and value are out of step and hitting that hard.
2. Don’t Follow the Herd (Timing is Everything)
The concept of being a contrarian is a popular investing strategy but most of the time it is misunderstood. The much celebrated success of true contrarians such as Warren Buffett, Charlie Munger and Benjamin Graham (to name a few) are well known. What these champions were able to do was not get carried away by rumour and talk of the next big thing. In fact they often used that kind of hype as a reason to not invest. Put simply a contrarian has success making decisions opposite to the popular.
Any check of investing social media would have you believing every investor these days is a contrarian. The thing is, very few of them actually are. No one should be contrarian for the sake of it, but only as a direct result of making your own investing/betting decisions and if they happen to be different to the herd then so be it. Zigging when the herd zags can be a ticket to huge profit, if the timing is right. It also requires a great deal of self confidence and belief. One thing you can be sure of, if your opinion is different from the crowd there will plenty of people lining up to tell you exactly that.
Sports betting is very similar, particularly when betting futures. Let’s use the NFL as a test case. Often after a particular week is done and dusted, especially early in the season, futures markets will change based on the big events that occurred that week. For instance an emphatic win may see a team’s divisional winner odds shorten dramatically, a seemingly bad loss could do the same in the other direction. The key is often these seemingly ‘defining’ results are not defining at all. They can be explained and are often not indicative of a teams true value, yet the markets moved anyhow.
Just because a team won by three touchdowns in Week 4 of the season doesn’t all of a sudden make them a different team to what they were a few days before the weekend. Either the price (odds) and true value were out of step last week or they are this week. The herd was right then or they are right now, but they are not right both times! Get that timing right and you will make a profit.
3. Be Rational in an Irrational Market
The first point to make here is that markets are not always irrational; just sometimes. When they are, it’s important as a bettor to remain rational and make considered and calm decisions. Keep your head.
Most value investors are NOT buying a stock after good news is released to the market. They have either bought the stock beforehand and ride the growth that comes from the good news or they are cashing out of the stock when the inevitable overreaction to the news comes.
It is amazing how often the stock market overreacts both positively or negatively to small morsels of information. Sports betting markets are exactly the same!
This is never more evident when a big name player is traded to a team. So much emphasis is placed on the impact of that player (sometimes correctly, sometimes not) that the markets move. The real effect may not actually be as large as the hype suggest but the public overreacts, the fans throw emotional money into the market, others double down and soon you have an overheated market. When irrational buyers buy with exuberance, price and value get out of step. Opportunity knocks.
Sports betting is an emotional past time. Overreactions are par for the course. Remain rational in irrational times and you will spot value set ups. Back yourself and your analysis, stay strong and profit. Keep calm everyone!
4. Be a Price Taker not a Price Maker
This is quite a simple philosophy. When betting on sport the price you take has to represent value in its own right. Often when a market is being steamed a bettor buys at a price, contributes to the flood of money, sees the price continue to move after they have bought and believe that they grabbed true value. This thinking is so often plain wrong.
The price movement after you placed your wager is less important than knowing the price you actually grabbed was a bargain. Think about the stock market. If you bought a stock at an expensive price and it continues to go up in value and become even more over priced have you really bought a bargain? Really you have just bought a ton too much risk!
The hardest thing to do when value investing is to not lie to yourself. Positive price movement after purchase is just one indicator of value and in the dichotomous win/lose world of sports betting it’s an unreliable one. Just because the price moved doesn’t give you any more or less chance of winning that bet.
Be a price taker. If the price weighs up against your analysis of true value then buy it. If you are having to bend the rules to ‘make’ a price look better than it probably is by adding excuses and exceptions you are not price making. Value investors are not price makers.
The Deeper Questions Value Investors Ask?
| 1 | How Much Money Do I Invest? |
| 2 | How Long is My Money Tied Up Before I Realize a Return? |
| 3 | What Opportunities am I missing If I Commit Here? |
| 4 | What Exit Strategy Do I Have? |
| 5 | Why Did I Still Lose? |
1. How Much Money Do I Invest ?
A great question. Knowing how much to invest is the hallmark of a great investor and likewise a winning sports bettor. Assuming bankroll management and sound staking strategy is already in place, the real indicator of how much to bet is based on the size of the perceived edge.
If a bettor truly believes they have found great value (an edge) then they are likely to bet more aggressively. Get the money in good. A career of betting when the odds are in your favor will be a long and profitable one.
The other aspect at play here is the risk appetite of the investor/bettor. Clearly some bettors prefer to err on the side of caution and bet a smaller percentage of their bankroll at any one time. Others will increase the risk in search of increased reward. This is a personal decision. The point is, if the edge is in your favor then it makes the question of how much to bet much easier to answer.
2. How Long is My Money Tied up Before I Realize a Return?
The investment time frame is critical for all bettors just as it is for value investors. Value investors often weigh up their investing success based on annual percentage yield from their portfolio. They typically use slightly longer time frames than sports bettors. That aside the theory is very similar.
The balancing act is weighing up the patience required to find a true value opportunity and the need to continue to make money.
A classic sports betting example is when a bettor sees a ‘look ahead line’ in for instance the NFL. A look ahead line refers to markets that are put up on games that are not to be played for some weeks, say a Week 8 market put up during Week 3.. Sometimes betting intuition will see real value on a moneyline or point spread market that the public is yet to wake up to. The need to grab the value while it is on offer means money needs to be put down right now. The time frame on this means that the bet won’t be resulted for some weeks. The original stake is tied up for that time.
Understanding the betting timeframe is critical to answer some of the other big questions.
3. What Other Opportunities Am I Missing If I Commit Here.
Opportunity cost is real in investing and sports betting. When stake or capital is tied up in a bet for a long period of time it is unavailable to be used to bet on other markets. One of the great frustrations of a battling sports bettor is to see a golden opportunity presents itself only to be short on cash to get a good piece of it.
When placing a value bet, just like investing, it is important to realize that if this bet is going to leave my available bankroll thin, then the opportunity had better be a good one!
4. What Exit Strategy Do I Have?
Effective exit strategies are the hallmarks of great investments. This is often referred to as liquidity. The ability to turn your investment or bet into real cash at any point in time. Clearly when investing that just means putting the assets up for sale and completing the transaction. In sports betting it can look slightly different.
Other than waiting out a bet until it is settled sports bettors do have two other potential exit strategies, a time honored favorite and a relatively new method.
The first one is hedging. This involves betting on an opposite market to lock in a profit. Hedging truly only works when the original bet represented value and over time its price has improved to the extent that the opposing markets are now offering some kind of value. Buying opposing markets at a time that they both offer real value means the bettor lock down a profit. The true nirvana for investors and bettors alike.
The second exit strategy that is now available for online and mobile sports bettors is the ‘cashing out’. This feature enables bettors to be offered a cash out figure throughout the life a bet. The cash out figure represents the amount the sportsbook is willing to offer the bettor to finalise their wager at that point in time. If the price on the market has moved in a positive direction for the bettor then the cash out figure will be greater than the stake and offer guaranteed profit. Cashing out takes some skill and is not always the best decision for the bettor. Check out our video example on cashing out to gain a greater understanding.
5. Why Did That Bet Lose?
Understanding and locating value is the only way investors and sports bettors make money over time. What it does not guarantee is that every transaction will produce profit. Sometimes things just don;t work out. When value investing the risk of losing the entire stake is much less but often the return is also much less in terms of percentage profit. In sports betting winning means a large return and unfortunately losing means the entire stake (or capital) invested is gone.
The greater risk reward relationship of sports betting means that to be truly profitable a bettor doesn’t need to win all the time, in fact assuming -110 odds that are typically seen on 50/50 markets a bettor needs to win only 52.38% of the time to break even. Seems low but it is not easy!
This means value investors and sports bettors alike need to become accustomed to the fact that from time to time they will lose. Sometimes they lose for a period of time i.e. a run of losses. While it may be difficult focussing only on the outcome can be disheartening. Focus on the process and the positive outcomes will happen sooner or later.
If you are finding it hard to deal with losing streaks then check out our strategy to overcome them here.
Finding the Best Value Sports Bets
A great place to start looking for value sports bets is in markets that are built for parity. High profile professional sports like the NFL, NBA and NHL are built for parity in that they utilise salary caps, free agency and drafts to even out competition.
The evenness of these competitions is great for TV ratings, fan interest, crowd figures and sponsorship dollars. Rags to riches stories and drought breaking championships are what drives the hype. This is great for the story tellers but it’s even better for sports bettors. What parity provides is week in week out value.
The popular thought is that sports betting markets like the NFL are super efficient and therefore winning money is extremely difficult. It is difficult, no question, on the whole sportsbooks have the markets dialled in perfectly, just not always, and much less often than the pundits think. Without fail what the NFL produces each and every week are seemingly unpredictable outcomes. They are predictably unpredictable.
Value investors call it volatility and volatile markets are bursting with opportunity. Become an expert on competitions built for evenness and very soon you will be sniffing out value all over the place.
Getting the Best Price Sports Bets
Value investors are experts at grabbing a great price. In sports betting the concept is the same but the process is slightly different. The price of a stock is determined by the market and offer to the public at that price only at any one point in time (given it can fluctuate by the second). Sports odds can actually be on offer to the market at a range of prices at the very same time.
To locate and land the best price it is essential sport bettors use multiple sportsbooks. Keeping your business locked in one place may seem like the right thing to do from a loyalty standpoint, but it costs you money. Owning accounts at multiple sportsbooks allows you to find price discrepancies for the same market and capitalize. Referring back to our earlier example, if you can find the same TV at another store for a bettor price you would be crazy not to go there. Sportsbooks are no different. It’s an absolute no brainer to shop around.
There is a huge list of benefits that come with using the services of many sportsbooks. Check out why it’s a complete must right here.
Another aspect to consider is that the best price may not exist pre game. It may it fact present itself in game. Learn to bet live on sports. This adds another string to your value shopping bow. Live betting is set to become one of the biggest forms of betting in the US just as it has across the mature British and European markets.
The Game Starts Now!
There is much for sports bettors to learn from the value investing philosophy. While applying these to sports betting requires some contextual changes the fundamental belief about price and value hold true. To become a profitable sports look deeper into these theories, apply them to your betting game and soon you could be banking a ton of fun money!