We recently compiled a list of the 10 Safe Stocks to Buy According to Billionaire Chilton. In this article, we are going to take a look at where Cintas Corporation (NASDAQ:CTAS) stands against the other safe stocks recommended by billionaire Richard Chilton.
Chilton Investment Company, founded by Richard L. Chilton, Jr. in 1992, aims to achieve appealing long-term returns while minimizing volatility. Since its establishment, the company has diligently adhered to a fundamental bottom-up investment approach, characterized by an ownership mindset. Its primary aim is to acquire fractional ownership in outstanding businesses rather than engaging in short-term stock trading.
Richard L. Chilton Jr. is the chairman, CEO, and chief investment officer of Chilton Investment Co. He has been a hedge fund manager for 18 years, which is a significant tenure in the challenging hedge fund industry. Chilton began his career in 1983 as an analyst with Alliance Capital Management, working alongside small-cap equity managers Frank Burr and Paul Jenkel. In 1990, he started a money management business for Allen & Co., a private bank, but left after two years to establish his own hedge fund company.
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Drawing on lessons in shorting stocks learned from Julian Robertson of Tiger Management Corp., Chilton set up his firm in a small, one-room office in New York, managing a classic long/short equity hedge fund. Chilton’s decision to start his own hedge fund was influenced by Art Samberg, a board member of the mutual fund Chilton co-managed. After expressing his desire to leave Allen & Co., where he had established a money management business, Samberg encouraged him to start his own fund, recognizing his talent. In January 1992, Chilton left Allen & Co., declined an offer from CEO Herbert Allen to buy a stake in his new venture, and instead accepted $1 million in investment from Allen, combining it with family money to launch his hedge fund with $5 million.
Starting his hedge fund in July 1992, Chilton aimed to create a classic long/short equity hedge fund, inspired by the first hedge fund model launched by Alfred Winslow Jones. His strategy was to always remain both long and short, without attempting to time the market. Chilton’s reputation grew through word of mouth, attracting prominent investors, endowments, and foundations. Pension funds later followed.
Chilton Investment’s appeal to institutional investors lies in its client-first approach and strong performance. The firm has been a leader in transparency and SEC registration. During the 2008 financial crisis, Chilton allowed clients to withdraw funds, which later returned. Chilton’s background in managing pension money at Alliance Capital gave him crucial experience in transparency and accountability, making his firm attractive for investors seeking long/short strategies. Chilton sees current opportunities in blue-chip companies with strong financials, solid dividend yields, and steady earnings growth. He expects these “dividend aristocrats” to outperform in a flat S&P environment, offering stability and consistent returns through growing dividends. Today, Chilton’s firm has grown significantly, with offices worldwide, a team of sector specialist analysts, and $7 billion under management across various strategies in global markets.
Richard L. Chilton Jr. graduated with a B.S. degree in Finance and Economics from Alfred University. Acknowledged for his business acumen, Forbes ranks Richard Chilton 773rd among the world’s wealthiest individuals, estimating his net worth at $1.3 billion. Chilton Investment Company caters to 9 clients, managing discretionary assets totaling $1,266,939,000, as per their Form ADV dated March 2024. Their 13F filing for Q1 2024 revealed managed 13F securities amounting to $3.6 billion.
Our Methodology
This article highlights the 10 safe stocks to buy according to billionaire Chilton, including analyst ratings and key details about each company, as well as the number of hedge funds invested in them.
Why focus on the stocks that hedge funds invest in? Our research shows that following the top picks of leading hedge funds can result in returns that beat the market. We use this strategy in our quarterly newsletter, where we choose 14 small-cap and large-cap stocks each quarter. Since May 2014, this approach has generated a 275% return, outperforming the benchmark by 150 percentage points. (see more details here)
A corporate office with staff members wearing company branded uniforms.
Cintas Corporation (NASDAQ:CTAS)
Chilton Investment Company’s Stake Value: $140,606,873
Number of Hedge Fund Holders: 46
One of the companies that made it to the safe stocks to buy according to billionaire Chilton is Cintas Corporation (NASDAQ:CTAS). Cintas Corporation (NASDAQ:CTAS) specializes in renting and selling uniforms, as well as offering products and services like restroom supplies, mops, and first aid kits. On July 18th, Cintas Corporation (NASDAQ:CTAS) shareholders saw a 5.4% increase in the company’s share price. This rise followed the release of financial results for the last quarter of fiscal year 2024 and forecasts for fiscal year 2025. Management’s guidance suggests that 2025 will be even better than 2024.
In the final quarter of fiscal year 2024, Cintas Corporation (NASDAQ:CTAS) set a record with $2.47 billion in revenue, up 8.2% from the previous year. The core uniform rental and facility services segment saw a 7.8% revenue increase to $1.91 billion, driven by new and existing customers. Revenue from first aid and safety services grew by 11.2%, and ‘all other’ operations rose by 7.9%. For fiscal year 2025, Cintas Corporation (NASDAQ:CTAS) projects revenue growth of 6.4% to 8% and earnings per share between $16.25 and $16.75.
In its Q4 2024 Earnings Call Transcript, Cintas Corporation (NASDAQ:CTAS) announced that its business across various sectors continues to perform well:
“Fourth quarter net income was $414.3 million, an increase of 19.7%. Earnings per diluted share for the fourth quarter were $3.99, an increase of 19.8% over the prior year fourth quarter. These results conclude a strong fiscal year marked by significant accomplishments, including robust revenue growth and margin expansion and excellent cash generation, which continue to fuel our balanced capital allocation strategy. The following are specific highlights of fiscal ’24. I’d like to begin with revenue. Fiscal year revenue was a record $9.6 billion, an increase of 8.9%. Organic growth was 8% for the year. Our First Aid and Safety Services operating segment exceeded $1 billion in annual revenue for the first time. Our top line growth is a function of the total value proposition we offer customers of all sizes and across industries and unique Cintas culture that drives our partners to deliver an outstanding customer experience.
Business across our focused verticals of health care, hospitality, education, and state and local government continue to perform well. We experienced strong demand for our services not only from existing customers but across our new business pipeline. About two-third of our new customers continue to come from no-programmers, underscoring our ability to capitalize on the vast growth opportunity that remains ahead. In addition, our retention rates remain strong. Our strong revenue performance also translated into continued growth in profits and earnings, including the following highlights. Fiscal ’24 operating income grew 14.8% for the year, and our operating margin of 21.6% was an all-time high. EPS grew 16.6% for the year. Our enhanced profitability and earnings growth is a reflection of our relentless focus on operational excellence in every aspect of our business, spanning strategic sourcing and supply chain initiatives, route and energy optimization opportunities with SmartTruck, and leveraging the SAP system to support greater stockroom visibility and efficient garment sharing.”
Investment analyst Quad 7 Capital predicts that Cintas Corporation (NASDAQ:CTAS) will continue to grow into fiscal year 2025. Although Cintas Corporation (NASDAQ:CTAS) currently has a high price-to-earnings ratio of 46X, its ongoing growth and share repurchases indicate potential for future appreciation. Despite the current high price, Cintas Corporation (NASDAQ:CTAS)’s strong financial results, efficient operations, and positive growth outlook justify its premium. Cintas Corporation (NASDAQ:CTAS) is recommended for long-term investors, particularly if there are chances to buy during market dips.
Cintas Corporation (NASDAQ:CTAS) is ranked 8th on our list of safe stocks to buy according to billionaire Chilton. By the end of the first quarter of 2024, Chilton Investment Company held 818,636 shares of Cintas Corporation (NASDAQ:CTAS), valued at $140,606,873. This investment represented 3.85% of Chilton’s total portfolio, based on regulatory filings.
Overall CTAS ranks 8th on our list of the safe stocks to buy according to billionaire Chilton. While we acknowledge the potential of CTAS as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CTAS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
