Profitable pinhooking
Every year, pinhookers buy almost 1,000 foals in Britain and Ireland and sell these as yearlings one year later. But how profitable is foal pinhooking? Dr Erwin Koenen reports on the returns and risks of foal pinhooking.
Solid pinhooking profits in 2023
Close to 1,500 foals were purchased at the Goffs and Tattersalls foal sales in 2022. Of this group, 62% were re-sold at one of the major yearling sales in 2023 (Goffs Premier, Tattersalls Ireland September, Goffs Orby and Tattersalls October).
We used the average costs and revenues of these 929 pinhooks to estimate their profitability. The costs include the purchase cost of the foal and an assumed keeping cost of £ 12,000. Revenues consist of the yearling hammer price minus sales commissions. The average pinhooking profit in 2023 was £ 9,561, representing an average return on investment (ROI) of 18%.
Average cost and revenues of foal pinhooking in 2023
| Purchase cost of a foal | -£ 42,267 |
| Keep cost | -£ 12,000 |
| Sale revenue yearling | £ 63,828 |
| Profit | £ 9,561 |
However, at the individual pinhook level, profits can widely diverge from the average. For instance, one of the most notable successes was achieved by Tally-Ho Stud, which sold a Cracksman x Dromana colt for 410,000 guineas after purchasing the foal for merely €48,000. Conversely, five pinhookers experienced losses exceeding 90% of their investment. While many pinhookers sold only one yearling, three Irish pinhookers – Tally-Ho Stud, Lynn Lodge Stud and Yeomanstown Stud – sold 20 or more, realising an average ROI of 51%, 25% and 22%, respectively.
Profitability also varied greatly by sire. The variations from the average are likely due to adjustments in expected yearling prices based on new information available since the 2022 foal sales. This suggests that particulary young sires, for whom limited information is available, can yield extreme results.
For instance, young sires such as Blue Point and Havana Grey achieved a very high ROI, probably because their racing offspring surpassed market expectations. On the other hand, Saxon Warrior’s yearlings seem not to meet expectations. As the future foal market assimilates this new information, their deviations from the average may become less pronounced.
Pinhooking results by sire in 2023 (20+ yearlings)
| Sire | Cost | ROI |
|---|---|---|
| Blue Point | £ 69,293 | 114% |
| Havana Grey | £ 55,656 | 111% |
| Earthlight | £ 69,306 | 66% |
| Sergei Prokofiev | £ 44,612 | 15% |
| Showcasing | £ 62,541 | 15% |
| Mehmas | £ 79,856 | 13% |
| Kodiac | £ 67,609 | 0% |
| Kodi Bear | £ 38,229 | -2% |
| Saxon Warrior | £ 62,969 | -10% |
Havana Grey (Credit: Whitsbury Manor Stud)
High risks
Although pinhooking can yield significant profits, it is commonly regarded as venture with high risk. To gain a more nuanced understanding of the variation in pinhooking ROI both within and across seasons, the outcomes of 8,276 pinhooks sold since 2015 were analysed in a manner akin to the analysis of the 2023 results.
Throughout this timeframe, the average pinhooking ROI was 12%, with fluctuations observed across the years. Notably, in 2017 and 2022, the ROI exceeded 20%, whereas in the COVID-impacted year of 2020, pinhookers faced an average loss of 1%.
The considerable risk associated with pinhooking is further underscored by the wide variation in the ROI of individual pinhooks. Only 39% of pinhooks turned a profit, while 41% incurred losses exceeding 30%. This variability suggests that, from a risk management standpoint, it would be prudent for an investor to engage in multiple pinhooks simultaneously to mitigate risks.
Percentage of individual pinhooks grouped by return on investment
| Return on investment | Percentage of pinhooks |
|---|---|
| >100% profit | 9% |
| 31 – 100% profit | 15% |
| 0 – 30% profit | 15% |
| 1 – 30% loss | 20% |
| >30% loss | 41% |
Statistics can improve profitability
What distinguishes a foal as a successful pinhook remains a closely guarded industry secret. Yet, statistical analyses of historical data have shown that a variety of factors, including stud fee, pedigree, gender and the offspring’s racing results influence ROI. This is where the expertise in quantitative genetics comes into play. Just as advanced statistical models are employed in beeding programmes for other livestock species to aid both breeders and producers, the Thoroughbred industry could adopt similar methodologies to identify promising pinhooking candidates.
Table 4 illustrates the impact of a more data-driven approach on the financial details of pinhooking. Using a multi-year dataset, foals were ranked within each sale based on their predicted ROI. Those with better rankings (according to predicted ROI) also achieved, on average, a higher actual ROI. For instance, the average realised ROI for the top 50 foals was 35%, whereas foals ranked higher than 500 (approximately the bottom half of the catalogue) experienced a loss of 7%. Although this data underscores that pre-selection markedly enhances profitability, it is crucial to acknowledge that even among the top-ranked group, 42% of the pinhooks still resulted in a loss. This highlights the inherent risk and complexity of pinhooking, underscoring the importance of leveraging data and expertise to inform decisions.
Average cost, realised ROI and percentage of profitable pinhooks after ranking foals by expected ROI.
| Rank | Cost | ROI | Percentage profitable |
|---|---|---|---|
| 1 – 50 | £ 121,274 | 35% | 58% |
| 51 – 100 | £ 81,341 | 25% | 50% |
| 101 – 200 | £ 68,999 | 22% | 48% |
| 201 – 500 | £ 51,619 | 14% | 43% |
| 501+ | £ 31,941 | -7% | 30% |
Art and science
In conclusion, pinhooking is profitable on average but involves great financial risks. Data-driven pre-selection can help pinhookers to reduce these risks and improve their financial results. When adding a solid scientific foundation to the currently used practical methods, the art of pinhooking can truly excel.
About
KYLLAROS
Kyllaros assists horse breeders and owners in achieving elite results.
“I founded Kyllaros with the vision that data-driven decisions can greatly facilitate breeding and sport performance. I am keen to utilise my 30 years of R&D experience in livestock improvement to work towards better breeding and sport results in the horse sector.”
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Dr Erwin Koenen
Principal Advisor
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