Churchill Downs Incorporated (CHDN): Hedge Funds Cashing Out

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Churchill Downs Incorporated (NASDAQ:CHDN) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Churchill Downs Incorporated (NASDAQ:CHDN) was in 25 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 32. CHDN shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 31 hedge funds in our database with CHDN holdings at the end of March. Our calculations also showed that CHDN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are viewed as slow, outdated investment vehicles of the past. While there are over 8000 funds in operation at the moment, Our researchers choose to focus on the crème de la crème of this club, about 850 funds. It is estimated that this group of investors handle bulk of all hedge funds’ total capital, and by watching their first-class stock picks, Insider Monkey has deciphered many investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to view the new hedge fund action surrounding Churchill Downs Incorporated (NASDAQ:CHDN).

What have hedge funds been doing with Churchill Downs Incorporated (NASDAQ:CHDN)?

At second quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the first quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in CHDN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CHDN A Good Stock To Buy?

The largest stake in Churchill Downs Incorporated (NASDAQ:CHDN) was held by PAR Capital Management, which reported holding $139.6 million worth of stock at the end of September. It was followed by Nitorum Capital with a $116.2 million position. Other investors bullish on the company included Millennium Management, GAMCO Investors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to Churchill Downs Incorporated (NASDAQ:CHDN), around 5.98% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, dishing out 5.36 percent of its 13F equity portfolio to CHDN.

Due to the fact that Churchill Downs Incorporated (NASDAQ:CHDN) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds who were dropping their entire stakes in the second quarter. At the top of the heap, Richard Merage’s MIG Capital dropped the biggest investment of all the hedgies followed by Insider Monkey, worth an estimated $27.9 million in stock. Philip Hempleman’s fund, Ardsley Partners, also dumped its stock, about $3.6 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 6 funds in the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Churchill Downs Incorporated (NASDAQ:CHDN) but similarly valued. These stocks are Sonoco Products Company (NYSE:SON), First Solar, Inc. (NASDAQ:FSLR), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Planet Fitness Inc (NYSE:PLNT), CubeSmart (NYSE:CUBE), Enel Chile S.A. (NYSE:ENIC), and Yamana Gold Inc. (NYSE:AUY). This group of stocks’ market caps match CHDN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SON 25 128777 2
FSLR 16 68174 -6
RETA 34 439815 1
PLNT 44 1253736 0
CUBE 24 211307 6
ENIC 5 15818 -3
AUY 18 407399 4
Average 23.7 360718 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $470 million in CHDN’s case. Planet Fitness Inc (NYSE:PLNT) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 5 bullish hedge fund positions. Churchill Downs Incorporated (NASDAQ:CHDN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CHDN is 48.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on CHDN as the stock returned 27.5% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.