At Insider Monkey, we believe that an investor can beat the market by following the moves of big hedge funds into the top picks they are bullish on. We track 750+ hedge funds, and among them is Three Bays Capital, managed by Matthew Sidman. In this article we are going to take a look at four companies from its equity portfolio, which helped it deliver positive returns in the third quarter, including Churchill Downs, Inc. (NASDAQ:CHDN), Cypress Semiconductor Corporation (NASDAQ:CY), Intercontinental Exchange Inc (NYSE:ICE), and Sensata Technologies Holding N.V. (NYSE:ST).
At the end of June, Three Bays Capital’s public equity portfolio was valued at $1.92 billion. The fund’s 13 long positions in companies that were worth at least $1 billion at the end of June delivered a return of 15.54% in the quarter, easily outpacing the retruns of the market. Although this way of calculating the fund’s returns is different from its actual returns, because we exclude positions in small-cap companies, and some other instruments, it still provides us with a good way for examining the hedge fund’s investment expertise in long positions.
That being said, let’s examine the third quarter performances of the aforementioned companies.
The first stock we are going to look at is racing, online entertainment, and gaming company, Churchill Downs, Inc. (NASDAQ:CHDN). During the second quarter, Three Bays Capital raised its stake in the company by 18% to 1.63 million shares, which were worth $205.59 million at the end of June. Boosting the stake was a good move for the fund, since the company advanced by 15.8% in the next three months.
At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a 33% slide from the previous quarter. One of the largest stakes in the company was reported by Paul Reeder and Edward Shapiro’s PAR Capital Management, which held a $179.3 million position. Other professional money managers that held long positions comprised Dmitry Balyasny’s Balyasny Asset Management, Mario Gabelli’s GAMCO Investors, and George Soros’ Soros Fund Management.
Three Bays Capital made no change to its position in Cypress Semiconductor Corporation (NASDAQ:CY) in the second quarter, continuing to hold 15.86 million shares of the stock, which comprised 8.71% of its portfolio’s value at the close of the second quarter. The stock delivered a positive return of 16.4% in the third quarter, while on a year-to-date basis it has advanced by 7.54%.
At the end of the second quarter, a total of 25 of the hedge funds that we follow held long positions in this stock, a jump of 92% from one quarter earlier. Among investors bullish on the company were OZ Management, GAMCO Investors, and Renaissance Technologies.
We’ll check out two more of the fund’s stock picks on the next page.