The “Fastest Two Minutes in Sports” is on Saturday at Churchill Downs in Kentucky. Since the founding of the race and racetrack (in which the company draws its name) in 1875, Churchill Downs Incorporated (CHDN) has branched out to a number of other lines of business including ownership of other race tracks and casinos around the US in addition to online gambling sites. CHDN has been like Secretariat over the last decade, posting a “10-bagger” by rising more than 10x in value since its low in 2009.
So how does the stock perform around “Derby Day” specifically? In the past 20 years, the period leading up to the Kentucky Derby has typically been pretty shaky for the stock with declines in the month and week leading up to the race. Historically, in the month before the derby, CHDN has only risen 28.57% of the time with an average decline of 2.26%. The week before has been slightly better, but still declines over half the time. This year bucked the trend, though, with the stock rising 12.11% over the past month and 6.91% in the past week; similar to 2016.
Looking forward, returns have typically been positive in trading the Monday after the Kentucky Derby with a gain averaging 0.52%. Both one week and three months after, outperformance is similar rising 0.41% and 0.44%, respectively, on average. Both have also been positive only a little more than half the time. One month out has been a little stronger as CHDN has been more consistently positive, rising 61.9% of the time, and averaging a 1.4% gain.
Fortunately, recent history points to a bit more of an optimistic outlook. Many of the declines occurred in the 90’s and pre-crisis era. In the current bull run, the stock has only been lower one month out three times and only twice 3 months out. One final note, the company has typically reported their Q1 earnings around this time (sometimes even the trading day before or after the derby) . In other words, performance at this time of year is not purely a factor of the race as earnings also can have a significant impact. Start a two-week free trial to Bespoke Institutional to access our interactive Earnings Database, Seasonality Tools, and much more.