SportsInsights.com Article -- Contrarian Sports Investing: Why it Works (December 2010)

SportsInsights put together some thoughts on its philosophy of "contrarian sports investing."  We publish betting articles and research on the topic -- but why does it actually work?  Is there really an edge?  How robust are the results?  A good betting strategy will have a fundamental reason for why it works -- and will be backed up by results.  Here, we take a "big picture" view of contrarian sports investing and "why it works."  

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Prime Example: Indianapolis Colts vs. Tennessee Titans

This NFL match-up helped to motivate this article.  This is a prime example of "contrarian investing" ( in any marketplace!) -- "in action."  About 6 out of every 7 bets took Peyton Manning's Indianapolis Colts, giving about three points. Indeed, earlier in the day, the betting percentages were even more "lopsided" -- with a whopping 91% of bettors taking the Colts.  The line opened at Colts -2 (at CRIS), but the steady pounding on the public favorite Colts pushed the line all the way up the Colts -3.5 (and even Colts -4 at some "public books").  

On the face of it, this game looked like a complete mis-match.  How could last-place Tennessee compete with mighty Indianapolis?  The Titans had lost five games in a row (entering Thursday night's contest), and were getting just a field goal!  Sports fans -- and particularly sports bettors were drooling over this game, thinking:  

• There is no reason the game should be competitive.  This should be easy money.

• Peyton Manning is a Hall of Fame QB who can often throw for four TDs in a game!

• Manning had a few off-weeks, so he is bound to bounce back strongly.

• Indianapolis got to the Super Bowl last year (and got to two out of the last four Super Bowls) -- winning four years ago.  

• Tennessee is in last place and has lost five games in a row.

Meanwhile, many SportsInsights' members took "the road less travelled" and "bet against the Public."  SportsInsights made the Tennessee Titans an NFL Square Play selection.  

And what happened?  Indeed, the Colts jumped ahead 21-0 -- and it was looking like a long night for the underdog Titans.  However, the Titans came back and made it competitive.  Very late in the game, the Titans were not threatening to win the game -- BUT (and this is a big "but") -- their late touchdown gave them a "backdoor" cover "against the spread" (ATS).  This allowed contrarian sports investors to squeak out a hard-fought value victory ATS.  

How can "David beat Goliath?"  Points Matter!

While Indy bettors are scratching their heads on how "that one got away" -- "value sports investors" realize that this is a business of numbers and profit margins.  The team at SportsInsights often writes articles and blog posts about "point spreads being a great equalizer."  Here are some thoughts:

• Oftentimes, the "favorite" completely demolishes the "underdog."  Please see this blog post:  http://blog.sportsinsights.com/2010/10/a-look-at-monday-night-football/.  Here, one of SportsInsights analysts commented that: "... Truth be told: if we played this game 100 times, we'd probably see 30 blowout victories for the (favorite).  They are still a strong team..."  Indeed, the favorite (New England in a Monday Night Football game), crushed Miami by a score of 41-14 in that lopsided-bet game. 

• On the other hand, in the same blog post, the analyst commented that this underdog would probably cover "against the spread" about 55% of the time. 

• This strategy does not work all of the time, but this is a "real edge."  And, like "real edges" -- although it is measurable and leads to profits, the profit margin is relatively thin.  

• People often ask, "How and why does contrarian investing work?"  Although most marketplaces are highly efficient, because real dollars are at stake -- public perceptions can often push pricing out of line with actual value.  In the case of sports betting, the betting lines are impacted by public perceptions and betting syndicates. 

• Line value: The sports marketplace is very efficient.  Take the Colts-Titan game that we mentioned above.  The point spread opened at Titans +2, which is exactly where the game ended!  However, the constant pounding of betting on the Colts pushed the line all the way up to Titans +3.5.  This extra bit helped contrarian sports investors squeak out a win -- and allows bettors who "bet against the Public" achieve a measurable edge against the spread.  

Long-term Results

Contrarian methods work in the sports marketplace, as measured by SportsInsights' Square Plays.  Below is a chart showing the results of "betting against the Public" using our Square Plays, which have been published for Members since 2003.  The chart shows results for every major U.S. sport and is taken from our Sports Investing book.

                Chart 1: Betting Against the Public (2003-2009)

Source:  Sports Investing: Profiting from Point Spreads, available at Amazon.

Database & Research

In addition to the fundamental reasons behind contrarian approaches, SportsInsights' results are based on years of research -- and tens of thousands of games across the major U.S. sports.  SportsInsights (SIs) has collected betting data for every major U.S. sport since the 2003.  Data is available for seven major US sports -- and may be purchased as a group -- or for individual sports.  

We collect the opening and closing lines (and "line movement," for various sportsbooks) as well as final scores -- and perhaps most importantly, SIs' proprietary "betting percentages," Our research team also "cleans" our data -- to ensure our historical data is useful for our research articles and our Members.  SIs' historical database for each sport is an important part of our research and value-added for our Members.  It is the backbone for our contrarian sports investing  methods and you can't find this kind of data and information anywhere else! 

SportsInsights: Who are we?

SportsInsights' contrarian methods have proven to add value in the sports marketplace over the years, across all major sports.  Founded in 1999, SportsInsights.com monitors actual betting activity and money flows on sporting events at major sportsbooks. Unique content and analytics has propelled SportsInsights to the forefront of the sports information industry.  The team of analysts at SportsInsights includes a former sportsbook risk manager/oddsmaker, a PhD, an MIT-trained quantitative analyst -- and a team of sports enthusiasts -- just like you.   

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 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.