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Jake Huneycutt
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Jake Huneycutt is the CEO of Huneycutt Capital + Research. He is a Portfolio Manager and the Editor of The Contrarian Value Newsletter. Jake is a "contrarian value" investor, seeking out companies with strong fundamentals that the overall market soured on. He utilizes a "margin... More
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Huneycutt Capital + Research
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  • Analyzing The Presidential Betting Markets

    I'm not a gambler by nature. As an investor, I'm always looking for scenarios where the odds are greatly in my favor. Gambling, on the other hand, often means making bets where the odds are rigged against you.

    That said, I do follow the betting markets. With a lot of sporting events, I follow the line to get a sense of public perception. I also follow political events. Political events are much tougher to set odds for than sporting events and for that reason, I find political betting markets intriguing.

    The last political event I followed closely was the papal election, which resulted in Francis I becoming the new Pope. Francis was initially considered a bit of a long-shot, so someone out there cashed in big on that.

    Now, I'm watching the 2016 Presidential election odds. Before I say anything else, I'll point out I have no intention to make any bets whatsoever. To be perfectly honest, I'm not even sure if it's legal here in the US. But I still find the odds intriguing because they seem way off in many cases.

    You can go to Paddy Power to see the latest odds for yourself, but here's the rundown on the US Presidential odds as of today (April 13, 2015):

    Hillary Clinton, 11-to-10

    Jeb Bush, 4-to-1

    Scott Walker, 9-to-1

    Marco Rubio, 11-to-1

    Chris Christie, 11-to-1

    Mitt Romney, 16-to-1

    Ben Carson, 16-to-1

    Rand Paul, 16-to-1

    Martin O'Malley, 25-to-1

    Elizabeth Warren, 28-to-1

    Ted Cruz, 33-to-1

    Joe Biden, 33-to-1

    Andrew Cuomo, 40-to-1

    Bobby Jindal, 40-to-1

    Mike Huckabee, 50-to-1

    Jim Webb, 50-to-1

    Carly Fiorina, 66-to-1

    Now for my analysis.

    Overvalued

    On the overvalued side, I'm going with Hillary Clinton, Marco Rubio, and Chris Christie. I'll also note that Mitt Romney at 16-to-1 is bizarre given that Romney has already announced he's not running.

    Hillary. Hillary is the odds-on favorite to win the Democratic Party nomination. However, there's pretty much no upside to her at 11-to-10. Based on recent polling, I suspect that she's no more than even-money to win the general election assuming she wins the Democratic nomination. Indeed, she's only slightly ahead in most recent general election polls in spite of the much weaker name recognition of the GOP candidates. Given this, 11-to-10 probably makes sense if we know with 100% certainty she wins the Democratic nomination. But we don't know that. In fact, I'd still only put her as an 80% favorite to win the nomination. It's a bad betting line because there's virtually no upside. Maybe at 15-to-10 it would make more sense.

    Rubio. Rubio at 11-to-1 seems overvalued to me. The problem for Rubio is that Jeb Bush has already entered the race and there's a huge overlap with the two candidates for fundraising. In essence, Bush has already crowded out Rubio. For this reason, I suspect that Rubio's campaign will struggle and he will bow out early.

    Christie. In 2012, I thought Christie would've had a good shot at winning the GOP nomination. In 2016, I think he'll have a much tougher go. His popularity is waning, particularly among the Republican base. While he's a good fund-raiser, I question where his support is going to come from. He's also hurt by Bush's entry into the race. I see him as a long-shot at this point.

    Romney. This is a no-brainer. How is Romney 16-to-1 when he's already announced he's not running? Unless Romney gets picked in some sort of bizarre compromise convention (the odds of which are probably about 1,000 to 1), he's not winning. Since Paddy Power caters more to the European crowd than the American crowd, perhaps this is merely a suckers' bet for Europeans that don't follow American politics closely.

    Undervalued

    Carly Fiorina. Fiorina may be a long-shot to win the GOP nomination, but I get a sense that she will end up running one of the best campaigns this cycle. It won't be enough to win in all likelihood, but she's greatly underestimated at 66-to-1.

    Scott Walker. Right now, I feel like the GOP nomination is a 3-way race. That could change once we get further into the cycle, but it's looking like a Walker-Bush-Paul competition in the early stages. Of the three, I view Walker as the favorite. At 9-to-1, he's undervalued.

    Rand Paul. Here's the thing --- Rand Paul is polling better against Hillary Clinton than any other Republican candidate. He's a bit of a non-traditional candidate, but he's a non-traditional candidate with a strong base of support, and he potential has the broadest base of all the candidates. I'm not predicting he'll win the nomination, but he's undervalued at 16-to-1. I believe the odds for Walker, Bush, and Paul should all be somewhat close.

    Martin O'Malley. Hillary is the odds-on favorite to win the Democratic Party nomination. Yet, she has a lot of baggage and the e-mail scandal will end up doing more damage than many realize. Does this means she's beatable in the Democratic Primary? Still probably a long-shot, but if she falters, O'Malley suddenly could go from 25-to-1 to something closer to 8-to-1. As I said, I'm not a gambler, and I don't plan on betting on any of this, but it would be a decent value pick.

    About Right

    I'll put Bush, Carson, Cruz, Biden, and Webb into this category.

    Conclusions

    I don't have any grand conclusions here. This is just a for-fun exercise. I could be totally wrong about all of this, but I'll take a look back at it at the end of 2016.

    I've tried to be objective as possible here. This is not an indication of support or opposition to any candidates; just a statement on the odds of winning. And a test of my political predicative powers. Fwiw, I suspect my political predicative powers are much weaker than my equity analysis powers.

    For a more expert take, you can visit Larry Sabato's Crystal Ball.

    Sabato on Democratic nomination.

    Sabato on Republican nomination.

    Apr 13 2:21 PM | Link | 1 Comment
  • Introducing "Value Invasion": A Web TV Show On Value Investment

    I've launched a new web TV show called "Value Invasion." You can check it out at Huneycutt Financial TV on YouTube. I'm hoping to start providing this content in Seeking Alpha articles, but for now, SA lacks any feature that would allow me to embed videos.

    If you're interested in seeing the show, I've done two episodes thus far. Check them out and let me know what you think. I definitely appreciate any feedback, so that I can refine the format and hopefully make the show better in the future.

    Episode #001: Vistaprint (VPRT)

    Episode #002: Krispy Kreme (NYSE:KKD)

    Hope you enjoy.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 03 1:24 PM | Link | 3 Comments
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