Once you have done a thorough analysis to make accurate assessments on draws, other essential observations come into play to help make when picking draws you want to bet on.
The different twins of value investing Warren Buffett and Charlie Munger, use the Four Filters as an effective formula to assess the goodness of a business.
They look for:
- a business that they are capable of understanding
- with a durable competitive advantage
- honest and competent management
- a bargain price as a margin of safety
Understanding a business
It is only the first step towards a profitable long-term investment.
After thorough analysis, asking yourself the right questions is crucial for an informed choice of a business.
Can you understand the economics of a product five years from now?
You understand a product, what it does and how it works.
The hard part is thinking about where it will be in five years.
Treat your draws like a business.
Does it have a durable competitive advantage?
People are very emotional when it comes to Sports Betting.
They bet on their favourite team for a good feeling, a superstitious act, a revealing dream.
All these behaviours aim for an immediate reward through the low odds of a favourite or look for an adrenaline rush through the high odds of an underdog.
Such behaviours protect the value of draws just as a wide moat protects a castle.
Betting on winners is like believing in historic brands such as Microsoft, Google, Amazon, Coke, Ferrari.
They are a long-standing landmark that is very hard to replace in their minds.
In this regard, I remember what Warren Buffett once said:
Chains of habit are too light to be felt until they are too heavy to be broken.
It is hard to pass from one thing to another when the first one is so rooted.
Many people supporting a company also increase the strength of the company, and those who do not will feel compelled to do so.
Big Spenders and Pro Tipsters reinforce the moat as well.
They can bet so much money and attract so many followers on the winners that their odds drop drastically while the odds of the draws go up.
Even the Bookmakers play their role to make the Castle of Draws inviolable.
Occasionally, miscalculating the fair odds, out of necessity or by mistake, they create value for a profitable bet on the draw.
Does it have honest and competent management?
Amateur Bettors, Big Spenders, Pro Tipsters, Sportsbooks, Bookmakers.
They feed the Draw business.
Good business with good management.
They unknowingly act as that good management with a lot of integrity and talent within a company capable of attracting investors.
Does it have a bargain price as a margin of safety?
The behaviour of such management allows the price of draws to flourish.
When bettors start wagering heavily on winners and cause the line to move enough to create value with overpriced odds for the draws, or when the bookmaker offers a bargain price on the market opening line.
In this way, you have the odds in your favour.
The bargain price itself is a margin of safety.
I would say:
A margin of safety is achieved when draws are wagered at odds sufficiently above the fair price to allow for human error, bad luck, or extreme volatility in an unpredictable and complex football betting market.