At Insider Monkey, we believe that an investor can beat the market by following the moves of big hedge funds into the top picks they are bullish on. We track 750+ hedge funds, and among them is Three Bays Capital, managed by Matthew Sidman. In this article we are going to take a look at four companies from its equity portfolio, which helped it deliver positive returns in the third quarter, including Churchill Downs, Inc. (NASDAQ:CHDN), Cypress Semiconductor Corporation (NASDAQ:CY), Intercontinental Exchange Inc (NYSE:ICE), and Sensata Technologies Holding N.V. (NYSE:ST).
At the end of June, Three Bays Capital’s public equity portfolio was valued at $1.92 billion. The fund’s 13 long positions in companies that were worth at least $1 billion at the end of June delivered a return of 15.54% in the quarter, easily outpacing the retruns of the market. Although this way of calculating the fund’s returns is different from its actual returns, because we exclude positions in small-cap companies, and some other instruments, it still provides us with a good way for examining the hedge fund’s investment expertise in long positions.
That being said, let’s examine the third quarter performances of the aforementioned companies.
The first stock we are going to look at is racing, online entertainment, and gaming company, Churchill Downs, Inc. (NASDAQ:CHDN). During the second quarter, Three Bays Capital raised its stake in the company by 18% to 1.63 million shares, which were worth $205.59 million at the end of June. Boosting the stake was a good move for the fund, since the company advanced by 15.8% in the next three months.
At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a 33% slide from the previous quarter. One of the largest stakes in the company was reported by Paul Reeder and Edward Shapiro’s PAR Capital Management, which held a $179.3 million position. Other professional money managers that held long positions comprised Dmitry Balyasny’s Balyasny Asset Management, Mario Gabelli’s GAMCO Investors, and George Soros’ Soros Fund Management.
Three Bays Capital made no change to its position in Cypress Semiconductor Corporation (NASDAQ:CY) in the second quarter, continuing to hold 15.86 million shares of the stock, which comprised 8.71% of its portfolio’s value at the close of the second quarter. The stock delivered a positive return of 16.4% in the third quarter, while on a year-to-date basis it has advanced by 7.54%.
At the end of the second quarter, a total of 25 of the hedge funds that we follow held long positions in this stock, a jump of 92% from one quarter earlier. Among investors bullish on the company were OZ Management, GAMCO Investors, and Renaissance Technologies.
We’ll check out two more of the fund’s stock picks on the next page.
Let’s take a look at the fund’s position in a company that runs clearing houses, listing venues, and regulated exchanges, Intercontinental Exchange Inc (NYSE:ICE). In the June quarter, Three Bays Capital decided to lower its stake in the company by 39%, to 367,346 shares, which were worth $94.03 million at the end of the quarter. Seeing that the company brought in a positive return of 5.6% during the third quarter, the lowering of the stake may be somewhat of a disappointment for the firm, though a larger stock actually would’ve lowered its returns, considering how well its other stocks performed.
At the end of June, a total of 49 of the hedge funds in our system were bullish on this stock, up by 2 from the end of March. According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Viking Global, managed by Andreas Halvorsen, held the biggest position ($290.1 million) in Intercontinental Exchange Inc (NYSE:ICE) among those funds. The second most bullish fund manager was William von Mueffling of Cantillon Capital Management ($265.9 million). Some other members of the smart money that held long positions included Ricky Sandler’s Eminence Capital, Jonathon Jacobson’s Highfields Capital Management, and Panayotis Takis Sparaggis’s Alkeon Capital Management.
The last stock we are going to examine in this article is Sensata Technologies Holding N.V. (NYSE:ST), which also had a positive return in the third quarter, of 11.1%. Considering the advancement of the stock, the fund made no mistake when it added the company to its portfolio in the June quarter. The fund acquired 1.42 million shares, which were worth $49.46 million on June 30 and comprised 2.57% of its portfolio’s value.
Heading into the third quarter of 2016, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 10% from one quarter earlier. Among these funds, Cantillon Capital Management held the most valuable stake in Sensata Technologies Holding N.V. (NYSE:ST), which was worth $212.3 million at the end of the second quarter. On the second spot was Blue Ridge Capital which amassed $169.3 million worth of shares. Moreover, Generation Investment Management, Stockbridge Partners, and Ashe Capital were also bullish on Sensata Technologies Holding N.V. (NYSE:ST).