Hedge Funds Are Crazy About Churchill Downs Incorporated (CHDN)

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Churchill Downs Incorporated (NASDAQ:CHDN).

Is Churchill Downs Incorporated (NASDAQ:CHDN) an attractive investment now? Hedge funds were becoming more confident. The number of bullish hedge fund bets went up by 16 recently. Churchill Downs Incorporated (NASDAQ:CHDN) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CHDN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a gander at the key hedge fund action regarding Churchill Downs Incorporated (NASDAQ:CHDN).

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

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 84% from the first quarter of 2020. On the other hand, there were a total of 25 hedge funds with a bullish position in CHDN a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Nitorum Capital held the most valuable stake in Churchill Downs Incorporated (NASDAQ:CHDN), which was worth $173 million at the end of the second quarter. On the second spot was Millennium Management which amassed $82.9 million worth of shares. Arrowstreet Capital, D E Shaw, and GAMCO Investors 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 Nitorum Capital allocated the biggest weight to Churchill Downs Incorporated (NASDAQ:CHDN), around 7.88% of its 13F portfolio. Hudson Way Capital Management is also relatively very bullish on the stock, dishing out 3.56 percent of its 13F equity portfolio to CHDN.

As aggregate interest increased, some big names have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, established the largest position in Churchill Downs Incorporated (NASDAQ:CHDN). Citadel Investment Group had $39.4 million invested in the company at the end of the quarter. Renaissance Technologies also made a $27.1 million investment in the stock during the quarter. The following funds were also among the new CHDN investors: Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Alexander Mitchell’s Scopus Asset Management, and Simon Sadler’s Segantii Capital.

Let’s check out hedge fund activity in other stocks similar to Churchill Downs Incorporated (NASDAQ:CHDN). These stocks are Rexford Industrial Realty Inc (NYSE:REXR), AutoNation, Inc. (NYSE:AN), Cameco Corporation (NYSE:CCJ), Acceleron Pharma Inc (NASDAQ:XLRN), Zhihu Inc. (NYSE:ZH), II-VI, Inc. (NASDAQ:IIVI), and Crocs, Inc. (NASDAQ:CROX). This group of stocks’ market caps are similar to CHDN’s market cap.

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As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $608 million. That figure was $694 million in CHDN’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand Zhihu Inc. (NYSE:ZH) is the least popular one with only 10 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 overall hedge fund sentiment score for CHDN is 77.9. 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. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on CHDN as the stock returned 23.8% since the end of Q2 (through 10/11) 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.

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