Bidding on Favorites vs Long Shots
When you enter an event during the IPO, it’s important to come in with a game plan. Obviously picking the golfers that finish at the top of the leaderboard is going to be profitable in the long run, but which types of golfers should you target? Should you bid on the favorites at the top, knowing their outcomes are much more predictable? Or should you target some of the long shots near the bottom, knowing that if they do well, you could make a 10-15x ROI.
Check out this table below which details out ROI by IPO price overall since we launched PGA events in June, assuming each golfer was held from IPO through the entire event. To finish in first in a PGA contest, you’ll likely need to finish with at least 600 chips, but likely much higher. The winner of the 3M Open Free contest finished with 1127 chips! Based on starting with a 250 chip balance, that means you’ll need at least a 140% ROI to be in the running for first place.
Clearly the best overall investment comes from the cheapest golfers, and as a class the sub-3.00 has performed very well. This is because the minimum payout per share is still 1.00 chip, so your downside is limited with these golfers. And your upside is as much as 20-25x.
The worst investment thus far has been on the favorites, because if one misses the cut, you’re looking at a -88% ROI or worse, while the upside is limited based on the winning golfer final valuation of 25 chips.
What do you think? What other strategies would you like to try? Let us know what you think!