Balyasny Asset Management is a $12.38 billion Chicago-based hedge fund led by Dmitry Balyasny. Founded in 2001, Balyasny’s fund is a multi-strategy fund specializing in macro investing. It was revealed through the fund’s 13F filing for the reporting period of March 31 that Balyasny is primarily invested in the consumer discretionary, information technology, and finance sectors, with combined exposure of over 60% to those sectors in his public equity portfolio. We took a look at the money manager’s top small-cap stocks and found an interesting connection: two of them, Penn National Gaming, Inc (NASDAQ:PENN), and Churchill Downs, Inc. (NASDAQ:CHDN) are in the horse racing industry, which was all over the news this past weekend as American Pharoah became the first horse in 37 years to win the Triple Crown. Could the iconic event revitalize the horse racing industry in the U.S, leading to a period of strong growth for these two stocks? We’ll look at those, plus Balyasny’s other top small-cap pick, Cypress Semiconductor Corporation (NASDAQ:CY), in this article.
Professional investors like Balyasny spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 142% and beaten the market by more than 84 percentage points since the end of August 2012, and by 4.6 percentage points in the first quarter of this year (see the details).
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Balyasny’s stake in Pennsylvania-based Penn National Gaming Inc, (NASDAQ:PENN) is his top small-cap pick, and was increased during the first quarter by 58% to 7.56 million shares with a value of $118.35 million. The gaming and racing company, founded in 1972 and led by CEO Timothy J. Wilmot, has returned nearly 26% year-to-date. Analysts have also increased their expectations for the company based on the opening of the Plainridge Casino in Massachusetts this June, in addition to the planned opening of the Hollywood Casino Jamul later this summer. Penn National Gaming Inc, (NASDAQ:PENN) is also in the midst of acquiring the Tropicana Casino in Las Vegas, a deal expected to be closed sometime this year. Those new openings and the acquisition of Tropicana will be added to a stable of 26 casinos run by Penn National. Analysts believe that those new casinos could increase Penn Nationals’ EBITDA by 13.3% in fiscal 2016. John Overdeck and David Siegel‘s Two Sigma Advisors also increased its stake in Penn National Gaming during the quarter, adding 123% to its stake for a total of 1.15 million shares.
