Hedge Funds Are Dumping Churchill Downs, Inc. (NASDAQ:CHDN) – Scientific Games Corp (NASDAQ:SGMS), WMS Industries Inc. (NYSE:WMS)

Churchill Downs, Inc. (NASDAQ:CHDN) was in 14 hedge funds’ portfolio at the end of December. CHDN investors should be aware of a decrease in enthusiasm from smart money in recent months. There were 14 hedge funds in our database with CHDN positions at the end of the previous quarter.

If you’d ask most investors, hedge funds are viewed as slow, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey hone in on the moguls of this group, close to 450 funds. It is estimated that this group oversees the lion’s share of the hedge fund industry’s total asset base, and by paying attention to their top stock picks, we have determined a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Equally as beneficial, positive insider trading sentiment is another way to parse down the financial markets. There are a variety of motivations for an executive to downsize shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the market-beating potential of this tactic if piggybackers understand what to do (learn more here).

Consequently, it’s important to take a gander at the key action surrounding Churchill Downs, Inc. (NASDAQ:CHDN).

Scientific Games Corp

How have hedgies been trading Churchill Downs, Inc. (NASDAQ:CHDN)?

At the end of the fourth quarter, a total of 14 of the hedge funds we track were long in this stock, a change of 0% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings substantially.

When looking at the hedgies we track, PAR Capital Management, managed by Paul Reeder and Edward Shapiro, holds the biggest position in Churchill Downs, Inc. (NASDAQ:CHDN). PAR Capital Management has a $57 million position in the stock, comprising 2.5% of its 13F portfolio. Coming in second is GAMCO Investors, managed by Mario Gabelli, which held a $56 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other hedgies that are bullish include George Soros’s Soros Fund Management, D. E. Shaw’s D E Shaw and James Pallotta’s Raptor Capital Management.

Because Churchill Downs, Inc. (NASDAQ:CHDN) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies who sold off their entire stakes in Q4. Intriguingly, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors said goodbye to the largest position of the “upper crust” of funds we watch, valued at an estimated $0 million in stock. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Churchill Downs, Inc. (NASDAQ:CHDN)?

Bullish insider trading is particularly usable when the company in question has experienced transactions within the past half-year. Over the last 180-day time period, Churchill Downs, Inc. (NASDAQ:CHDN) has experienced 1 unique insiders buying, and 4 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Churchill Downs, Inc. (NASDAQ:CHDN). These stocks are Asia Entertainment & Resources Ltd. (NASDAQ:AERL), Multimedia Games Holding Company Inc (NASDAQ:MGAM), Bally Technologies Inc. (NYSE:BYI), Scientific Games Corp (NASDAQ:SGMS), and WMS Industries Inc. (NYSE:WMS). All of these stocks are in the gaming activities industry and their market caps resemble CHDN’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Asia Entertainment & Resources Ltd. (NASDAQ:AERL) 1 0 0
Multimedia Games Holding Company Inc (NASDAQ:MGAM) 15 1 9
Bally Technologies Inc. (NYSE:BYI) 20 1 5
Scientific Games Corp (NASDAQ:SGMS) 3 0 0
WMS Industries Inc. (NYSE:WMS) 7 0 0

With the results shown by our studies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Churchill Downs, Inc. (NASDAQ:CHDN) applies perfectly to this mantra.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.