Hedge Funds Are Souring On Churchill Downs Incorporated (CHDN)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Churchill Downs Incorporated (NASDAQ:CHDN) to find out whether there were any major changes in hedge funds’ views.

Is Churchill Downs Incorporated (NASDAQ:CHDN) a buy, sell, or hold? The best stock pickers were taking a bearish view. The number of bullish hedge fund positions decreased by 6 lately. Churchill Downs Incorporated (NASDAQ:CHDN) was in 29 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that CHDN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a glance at the latest hedge fund action encompassing Churchill Downs Incorporated (NASDAQ:CHDN).

Do Hedge Funds Think CHDN Is A Good Stock To Buy Now?

At third quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CHDN over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Nitorum Capital, managed by Seth Rosen, holds the most valuable position in Churchill Downs Incorporated (NASDAQ:CHDN). Nitorum Capital has a $195.8 million position in the stock, comprising 9.3% of its 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $54 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism include Mario Gabelli’s GAMCO Investors, Israel Englander’s Millennium Management and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to Churchill Downs Incorporated (NASDAQ:CHDN), around 9.32% of its 13F portfolio. Hudson Way Capital Management is also relatively very bullish on the stock, earmarking 5.75 percent of its 13F equity portfolio to CHDN.

Judging by the fact that Churchill Downs Incorporated (NASDAQ:CHDN) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that slashed their full holdings last quarter. At the top of the heap, Alexander Mitchell’s Scopus Asset Management said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at about $19.8 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also dropped its stock, about $17.5 million worth. These transactions are interesting, as total hedge fund interest fell by 6 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Churchill Downs Incorporated (NASDAQ:CHDN). We will take a look at AGCO Corporation (NYSE:AGCO), Federal Realty Investment Trust (NYSE:FRT), Credit Acceptance Corp. (NASDAQ:CACC), Jefferies Financial Group Inc. (NYSE:JEF), Alcoa Corporation (NYSE:AA), Mirati Therapeutics, Inc. (NASDAQ:MRTX), and West Fraser Timber Co. Ltd. (NYSE:WFG). All of these stocks’ market caps resemble CHDN’s market cap.

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As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1013 million. That figure was $617 million in CHDN’s case. Mirati Therapeutics, Inc. (NASDAQ:MRTX) is the most popular stock in this table. On the other hand Federal Realty Investment Trust (NYSE:FRT) is the least popular one with only 21 bullish hedge fund positions. Churchill Downs Incorporated (NASDAQ:CHDN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHDN is 39.9. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately CHDN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CHDN investors were disappointed as the stock returned -6.6% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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