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Hedge Funds Are Piling Into Churchill Downs, Inc. (CHDN)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Churchill Downs, Inc. (NASDAQ:CHDN).

Churchill Downs, Inc. (NASDAQ:CHDN) shareholders have witnessed an increase in hedge fund sentiment lately. CHDN was in 26 hedge funds’ portfolios at the end of the third quarter of 2015. There were 22 hedge funds in our database with CHDN holdings at the end of the previous quarter. At the end of this article we will also compare CHDN to other stocks including Metals USA Holdings Corp (NYSE:MUSA), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), and CBL & Associates Properties, Inc. (NYSE:CBL) to get a better sense of its popularity.

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Today there are plenty of formulas stock traders have at their disposal to assess their holdings. Two of the less known formulas are hedge fund and insider trading indicators. Hedge fund experts at Insider Monkey have shown that, historically, those who follow the best picks of the best fund managers can outpace the S&P 500 by a very impressive amount (see the details here).

With all of this in mind, we’re going to take a gander at the latest action regarding Churchill Downs, Inc. (NASDAQ:CHDN).

What have hedge funds been doing with Churchill Downs, Inc. (NASDAQ:CHDN)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish in this stock, a change of 18% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, PAR Capital Management, managed by Paul Reeder and Edward Shapiro, holds the number one position in Churchill Downs, Inc. (NASDAQ:CHDN). PAR Capital Management has a $172.2 million position in the stock, comprising 3.6% of its 13F portfolio. Coming in second is Matthew Sidman of Three Bays Capital, with a $154.5 million position; 7.7% of its 13F portfolio is allocated to the company. Some other peers that are bullish comprise Dmitry Balyasny’s Balyasny Asset Management, Mario Gabelli’s GAMCO Investors and George Soros’s Soros Fund Management.

As aggregate interest increased, some big names were breaking ground themselves. HG Vora Capital Management, managed by Parag Vora, created the most outsized position in Churchill Downs, Inc. (NASDAQ:CHDN). HG Vora Capital Management had $33.5 million invested in the company at the end of the quarter. Value investor Joel Greenblatt’s Gotham Asset Management also made a $17.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Andre F. Perold’s HighVista Strategies, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also review hedge fund activity in other stocks similar to Churchill Downs, Inc. (NASDAQ:CHDN). These stocks are Metals USA Holdings Corp (NYSE:MUSA), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), CBL & Associates Properties, Inc. (NYSE:CBL), and PRA Health Sciences Inc (NASDAQ:PRAH). This group of stocks’ market values are similar to CHDN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MUSA 22 208731 3
MDRX 24 685662 -4
CBL 21 137715 3
PRAH 11 37629 0

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) is the most popular stock in this table. On the other hand PRA Health Sciences Inc (NASDAQ:PRAH) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Churchill Downs, Inc. (NASDAQ:CHDN) is more popular among hedge funds. Considering that hedge funds are fond of this stock, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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