It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during October and average hedge fund losing about 3%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 4 percentage points during the first half of Q4, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Churchill Downs Incorporated (NASDAQ:CHDN) during the quarter below.
Churchill Downs Incorporated (NASDAQ:CHDN) investors should pay attention to an increase in hedge fund interest in recent months. CHDN was in 26 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with CHDN positions at the end of the previous quarter. Our calculations also showed that chdn isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to view the fresh hedge fund action regarding Churchill Downs Incorporated (NASDAQ:CHDN).
What have hedge funds been doing with Churchill Downs Incorporated (NASDAQ:CHDN)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2018. By comparison, 22 hedge funds held shares or bullish call options in CHDN heading into this year. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Churchill Downs Incorporated (NASDAQ:CHDN) was held by PAR Capital Management, which reported holding $192.7 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $96.9 million position. Other investors bullish on the company included Scopus Asset Management, Citadel Investment Group, and GAMCO Investors.
Consequently, specific money managers were leading the bulls’ herd. Carbonado Capital, managed by Gregory Thomas, assembled the biggest position in Churchill Downs Incorporated (NASDAQ:CHDN). Carbonado Capital had $12.3 million invested in the company at the end of the quarter. William Hyatt’s Hudson Way Capital Management also made a $10.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ward Davis and Brian Agnew’s Caerus Global Investors, Sara Nainzadeh’s Centenus Global Management, and Jeffrey Talpins’s Element Capital Management.
Let’s check out hedge fund activity in other stocks similar to Churchill Downs Incorporated (NASDAQ:CHDN). These stocks are Cleveland-Cliffs Inc (NYSE:CLF), Endo International plc (NASDAQ:ENDP), John Bean Technologies Corporation (NYSE:JBT), and United Bankshares, Inc. (NASDAQ:UBSI). This group of stocks’ market valuations are similar to CHDN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $550 million in CHDN’s case. Cleveland-Cliffs Inc (NYSE:CLF) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Churchill Downs Incorporated (NASDAQ:CHDN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.