The London Company , an investment management company, released its second-quarter 2026 investor letter for its "Small-Mid Cap Strategy." The letter can be downloaded here . U.S. equities rebounded sharply in Q2, with the Russell 3000 gaining 15.4%, supported by AI infrastructure spending, strong earnings, and easing Middle East tensions. Technology led the rally as semiconductors recovered, while Energy and defensive sectors lagged. The portfolio returned 12.1% gross and 11.8% net compared with a 20.3% gain in the Russell 2500 Index. Stock selection weighed on relative performance, as high-beta and high-volatility stocks dominated returns while Quality remained weak, although results improved in June as market participation broadened. Looking ahead, resilient earnings and AI productivity support a constructive outlook, but negative hyperscaler cash flow, sticky inflation, geopolitical risks, index concentration, and elevated valuations warrant caution. The strategy continues to emphasize quality, downside protection, and active management. Additionally, reviewing the Fund's top five holdings could also highlight its best ideas for 2026.
In its second-quarter 2026 investor letter, London Company SMID Cap Strategy highlighted Churchill Downs Incorporated (NASDAQ: CHDN ). Churchill Downs Incorporated (NASDAQ:CHDN) operates live and historical racing entertainment venues, online wagering businesses, and regional casino gaming properties in the United States. On August 26, 2026, Churchill Downs Incorporated (NASDAQ:CHDN) closed at $87.57 per share. Over the past month, Churchill Downs Incorporated (NASDAQ:CHDN) returned 4.40%, while its shares have declined 16.08% in the last 52 weeks. Churchill Downs Incorporated (NASDAQ:CHDN) has a market capitalization of $6.10 billion.
London Company SMID Cap Strategy stated the following regarding Churchill Downs Incorporated (NASDAQ:CHDN) in its Q2 2026 investor letter:
" Churchill Downs Incorporated (NASDAQ:CHDN) declined despite solid operating results as Derby Week growth fell slightly short of elevated investor expectations. The business continues to execute well, supported by strong Historical Racing Machine growth, improving leverage, and healthy cash flow generation. We believe the recent weakness is disconnected from the underlying fundamentals and remain confident in the company's ability to compound earnings through disciplined capital allocation, pricing power, and continued investment in its differentiated gaming and racing assets."
Churchill Downs Incorporated (NASDAQ:CHDN) is not on our list of the 40 Most Popular Stocks Among Hedge Funds . As per our database, 50 hedge fund portfolios held Churchill Downs Incorporated (NASDAQ:CHDN) at the end of the second quarter which was 52 in the previous quarter. While we acknowledge the potential of Churchill Downs Incorporated (NASDAQ:CHDN) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock .
In another article , we covered Churchill Downs Incorporated (NASDAQ:CHDN) and shared a bullish thesis on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey .
