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Is Churchill Downs Incorporated (CHDN) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Churchill Downs Incorporated (NASDAQ:CHDN) based on that data.

Churchill Downs Incorporated (NASDAQ:CHDN) was in 31 hedge funds’ portfolios at the end of March. CHDN has experienced a decrease in support from the world’s most elite money managers of late. There were 32 hedge funds in our database with CHDN holdings at the end of the previous quarter. Our calculations also showed that CHDN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the key hedge fund action surrounding Churchill Downs Incorporated (NASDAQ:CHDN).

What have hedge funds been doing with Churchill Downs Incorporated (NASDAQ:CHDN)?

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHDN over the last 18 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is CHDN A Good Stock To Buy?

More specifically, PAR Capital Management was the largest shareholder of Churchill Downs Incorporated (NASDAQ:CHDN), with a stake worth $108.1 million reported as of the end of September. Trailing PAR Capital Management was Nitorum Capital, which amassed a stake valued at $82.8 million. Citadel Investment Group, Hudson Way Capital Management, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hudson Way Capital Management allocated the biggest weight to Churchill Downs Incorporated (NASDAQ:CHDN), around 15.77% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, dishing out 6.41 percent of its 13F equity portfolio to CHDN.

Since Churchill Downs Incorporated (NASDAQ:CHDN) has experienced a decline in interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds that elected to cut their entire stakes heading into Q4. At the top of the heap, Baker Burleson and Stormy Scott’s Banbury Partners said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $28.9 million in stock, and Ben Gambill’s Tiger Eye Capital was right behind this move, as the fund said goodbye to about $16.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Churchill Downs Incorporated (NASDAQ:CHDN) but similarly valued. We will take a look at Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), Quidel Corporation (NASDAQ:QDEL), Axalta Coating Systems Ltd (NYSE:AXTA), and Eastgroup Properties Inc (NYSE:EGP). This group of stocks’ market values resemble CHDN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TKC 3 40169 -4
QDEL 22 125541 4
AXTA 49 1105920 -11
EGP 13 36375 3
Average 21.75 327001 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $327 million. That figure was $445 million in CHDN’s case. Axalta Coating Systems Ltd (NYSE:AXTA) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 3 bullish hedge fund positions. Churchill Downs Incorporated (NASDAQ:CHDN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on CHDN as the stock returned 28.9% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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