Avis Budget Group Inc. (CAR) Among $2.5 Billion PAR Capital Management’s Small-Cap Picks

Penn National Gaming, Inc (NASDAQ:PENN), the $4.5 billion market cap gaming facilities operator, was another of PAR’s small cap picks. Many gaming and casino stocks are currently trading at high earnings multiples, and Penn National Gaming is no exception; specifically, the trailing P/E is 29. Revenue growth has been decent, but does not seem to be high enough to justify that valuation and earnings have actually been down. Billionaire Israel Englander’s Millennium Management was buying between October and December and closed 2012 with about 860,000 shares in its portfolio (find Englander’s favorite stocks).

According to the 13F, the fund owned 1.4 million shares of United Rentals, Inc. (NYSE:URI). The equipment rental company is highly exposed to macro conditions with a beta of 3.0. Growth on both top and bottom lines has been very strong- over 40% in its last quarterly report compared to the fourth quarter of 2011- and while the company is dependent on future growth the sell-side is bullish as the forward P/E is only 9. Highbridge Capital Management, managed by billionaire Glenn Dubin, was another major shareholder at the beginning of January (see more stocks Dubin likes).

PAR had about 860,000 shares of Churchill Downs, Inc. (NASDAQ:CHDN) in its portfolio, per the filing. At a market capitalization of $1.2 billion, Churchill Downs trades at 22 times trailing earnings. Not only is that look a bit expensive to us, but financial performance has not been particularly strong lately: sales grew only 6% in its most recent quarter compared to the same period in the previous year, while net income was down substantially. Mario Gabelli’s GAMCO Investors slightly increased the size of its position in Churchill Downs to a total of about 850,000 shares according to its own 13F.

Disclosure: I own no shares of any stocks mentioned in this article.