Is CHDN Stock A Buy or Sell?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Churchill Downs Incorporated (NASDAQ:CHDN)? The smart money sentiment can provide an answer to this question.

Is CHDN stock a buy? Money managers were in a bearish mood. The number of bullish hedge fund bets went down by 3 lately. Churchill Downs Incorporated (NASDAQ:CHDN) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 32. Our calculations also showed that CHDN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Brian Gustavson of 1060 Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind we’re going to review the key hedge fund action surrounding Churchill Downs Incorporated (NASDAQ:CHDN).

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

Heading into the first quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHDN over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Seth Rosen’s Nitorum Capital has the largest position in Churchill Downs Incorporated (NASDAQ:CHDN), worth close to $169.9 million, accounting for 6.6% of its total 13F portfolio. Coming in second is Mario Gabelli of GAMCO Investors, with a $44.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position 1060 Capital Management allocated the biggest weight to Churchill Downs Incorporated (NASDAQ:CHDN), around 12.05% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, setting aside 6.58 percent of its 13F equity portfolio to CHDN.

Due to the fact that Churchill Downs Incorporated (NASDAQ:CHDN) has faced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of fund managers who were dropping their positions entirely heading into Q1. Interestingly, Paul Reeder and Edward Shapiro’s PAR Capital Management cut the biggest position of all the hedgies monitored by Insider Monkey, comprising about $167.7 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund said goodbye to about $6.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q1.

Let’s now review hedge fund activity in other stocks similar to Churchill Downs Incorporated (NASDAQ:CHDN). These stocks are Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), Americold Realty Trust (NYSE:COLD), Diamondback Energy Inc (NASDAQ:FANG), Woodward Inc (NASDAQ:WWD), BlackLine, Inc. (NASDAQ:BL), Reliance Steel & Aluminum Co. (NYSE:RS), and Ritchie Bros. Auctioneers Incorporated (NYSE:RBA). This group of stocks’ market caps match CHDN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $460 million. That figure was $377 million in CHDN’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 4 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 60.4. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately CHDN wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on CHDN were disappointed as the stock returned 10.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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