Lessons in Sports Investing (Part II: Ideas, Thoughts and Value)

In Part I of our article, “Lessons in Sports Investing,” we discussed the Computer Group, one of the first (and the most famous) betting syndicates. We learned a bit about their story – and saw how they were able to beat the “looser” lines of the early eighties.

In Part II of this series, we’ll discuss some ideas and thoughts on sports investing – and take a look at some data and numbers. We’ll learn how SportsInsights.com can help us to improve our sports investing results – and see what specific sports marketplace numbers might mean. The information in this article is for entertainment and educational purposes only.

Mid-to-High 50’s
That might sound like the weather forecast – but what we’re talking about is a target winning percentage for realistic sports investors. In Part 1 of this article, we saw that sportsbooks can be beaten. We learned that the famed Computer Group achieved a 60% winning percentage (but perhaps back when lines were “looser”).

We believe that hard work and good information can lead to a 60% winning percentage –
on selected plays. Note, however, that professional gamblers typically target 55% as their winning percentage because this can potentially lead to more plays and higher profits.

SportsInsights.com uses certain “summary statistics” and information to give its members an edge in the sports betting world. Our members can analyze how the line has moved, who the betting public likes, how much interest there is on a certain game (number of bets), and the different lines at various sportsbooks.

Public Percentage
SportsInsights has several articles dedicated to Public Percentage and “Betting Against the Public.” We have shown that Betting Against the Public works across the major sports and is statistically significant. In order to maximize profits, sportsbooks tend to adjust their lines in order to exploit the Public’s tendency to bet on favorites and winners. Our research shows that simply “Betting Against the Public” can put this “edge” on your side – and help to improve your bottom line.

Tracking the Smart Money
In Part 1 of our series, we discussed betting syndicates and sports betting groups. These professional gamblers seek value in sports betting lines. Using statistics that SportsInsights gathers, we are able to track where the “Smart Money” might be going. If a line moves in one direction, but the Public is on the other side, it implies that “bigger” – and normally “smarter” or “sharper” – money is on the side of the line move. This has proven to be a successful way to invest in sports.

Public Percentage and Line Moves
The Smart Money approach is one of the strongest tools available to sports investors and is available to SportsInsights members. We’re always studying the data and various methods to give our members an edge in sports investing. Based on our research, we have learned that for Smart Money methods, the parameter used for “public percentage” works for a relatively wide range of “public fade percentages.” If you use an extreme public fade percentage (say, public is less than 20% on one side), it may lead to very few picks and being too selective – at least for Smart Money methods. Our studies show that Smart Money methods work across various major sports with the Public Percents as high as 45%. (Some sports investors may want to use 35% or 40% to be more selective).

A more important parameter for the Smart Money approach is the magnitude of the line move. You might think that a large line move might be a stronger indicator of Smart Money. While this might be true in some cases, a large point spread move often means that value is disappearing. Our research shows that sports investors should seek a meaningful line move (to avoid “noise”) – but not too large of a move (or else the edge might be gone).

Basketball and Smart Money Methods
With March Madness upon us (and the NBA in full swing) – we thought we would focus some of our thoughts and ideas related to Smart Money methods – on basketball. What does a “meaningful” line move mean?

Based on our data, we see that Smart Money moves that involve a line move of just 0.5 (by game time) are marginally profitable. There’s probably “noise” in the data so that these “smaller” Smart Money moves are not necessarily a clear indication of Smart Money.

However, Smart Money moves triggered as a result of line moves of 1.0 or more – are a clearer indication of Smart Money – and perhaps syndicates and betting groups. Note however, that as the line moves increase, the value of the Smart Money indicator decreases.

Line Moves, Value and Winning Percentage
How does a change in Line Move impact your expected winning percentage? For instance, let’s say that we believe that the syndicates can achieve a 57% winning percentage. Perhaps the first chunks of money they get down can actually win at a 60% rate. The syndicate may tell its associates to bet on the Knicks at +7 (and as low as +6).

Our research agrees with industry estimates that a line move of 0.5 to 1.0 point can impact your expected winning percentage by 2%-5%. In the above example, this is one reason the syndicate may let its people know they can bet down to +6. Their first bets at +7 might be expected to win at 60%; bets as low as +6 might be expected to win at, say, 55%.

Similarly, our Smart Money approach might be expected to achieve a winning percentage a few percent lower than the syndicates, on average. Our research agrees with this back-of-the-envelope calculation – that Smart Money methods can achieve a winning percentage in the mid-50% range. Note that our research is currently based on “closing” data – that is – information right before game time.

Timing
Another important factor is the timing of WHEN bettors actually determine a play. Some people will wait until minutes before game time to capture as much information as possible. For others, this is not practical.

In the previous section, we saw that Smart Money triggers for basketball were most effective when closing lines were at least 1 point different from the opening line. However, we also noted that this is based on the line just before tip-off.

What if we used a “Smart Money” method, say two hours or so before game time, and grabbed a play when there was just a 0.5-point line move (with the Public on the Other Side)? Oftentimes, this would save us at least a half-point in the spread – which can increase a winning percentage by perhaps 2%.

SportsInsights Research
Now, you think: “How often does a line continue to move?” Based on preliminary estimates, a 0.5-point line move DOES often continue and becomes a “final” line move of 1.0 or more (which would trigger a more official “Smart Money Move”). Stay tuned: SportsInsights is looking into ways of improving its database capabilities so that we can say this more definitively.

As you can see, there’s a lot to study. We’re trying to expand our database capabilities to better study the sports marketplace. Please share your thoughts and let us know what ideas you might have to improve our results and research capabilities.

Other Thoughts and Ideas
• Large Number of Bets – games with a relatively larger number of bets are good in several ways. Firstly, it means that the data and indicators (public betting percentage and Smart Money moves) can be better trusted (more data = more proof). Secondly, it typically means that a game is on television or will be followed heavily – meaning more “Joe Public” is watching. Our research shows that SportsInsights techniques perform slightly better in these games.

• Football is a slightly different animal due to lines being near “key numbers.” A “meaningful” line move might often be 0.5 points.

• Analogies can be made to Moneyline sports such as baseball and hockey. That is, Smart Money methods can be applied. You would want a meaningful line move to signal a Smart Money Trigger – but at some point, much of the value would be gone.

Disclaimer
We do not guarantee that the trends and biases we’ve found will continue to exist. It is impossible to predict the future. Any serious academic research in the field of “market efficiencies” recognizes that inefficiencies may disappear or fade over time. Once inefficiencies are discovered, it is only a matter of time before the market corrects itself. We do not guarantee our data is error-free. However, we’ve tried our best to make sure every score and percentage is correct. Past performance is not indicative of future performance. The information in this article is for entertainment and educational purposes only.