Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Churchill Downs, Inc. (NASDAQ:CHDN) the right pick for your portfolio? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund positions rose by 3 in recent months. At the end of this article we will also compare CHDN to other stocks including HNI Corp (NYSE:HNI), Carrizo Oil & Gas, Inc. (NASDAQ:CRZO), and Kosmos Energy Ltd (NYSE:KOS) to get a better sense of its popularity.
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Keeping this in mind, we’re going to take a look at the latest action encompassing Churchill Downs, Inc. (NASDAQ:CHDN).
What have hedge funds been doing with Churchill Downs, Inc. (NASDAQ:CHDN)?
Heading into the fourth quarter of 2016, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, up 19% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management has the largest position in Churchill Downs, Inc. (NASDAQ:CHDN), worth close to $207.6 million and comprising 3% of its total 13F portfolio. Sitting at the No. 2 spot is Three Bays Capital, managed by Matthew Sidman, which holds a $194.9 million position; 12.9% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism encompass Dmitry Balyasny’s Balyasny Asset Management, Mario Gabelli’s GAMCO Investors and George Soros’s Soros Fund Management.
Consequently, specific money managers were breaking ground themselves. Gotham Asset Management, run by Joel Greenblatt, established the most outsized position in Churchill Downs, Inc. (NASDAQ:CHDN). According to its latest 13F filing, the fund had $3 million invested in the company at the end of the quarter. Brian Taylor’s Pine River Capital Management also initiated a $0.7 million position during the quarter. The other funds with brand new CHDN positions are Alec Litowitz and Ross Laser’s Magnetar Capital and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Churchill Downs, Inc. (NASDAQ:CHDN) but similarly valued. These stocks are HNI Corp (NYSE:HNI), Carrizo Oil & Gas, Inc. (NASDAQ:CRZO), Kosmos Energy Ltd (NYSE:KOS), and Cornerstone OnDemand, Inc. (NASDAQ:CSOD). All of these stocks’ market caps match CHDN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $705 million in CHDN’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Kosmos Energy Ltd (NYSE:KOS) is the least popular one with only 7 bullish hedge fund positions. Churchill Downs, Inc. (NASDAQ:CHDN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CSOD might be a better candidate to consider a long position.