In this article we will analyze whether Cintas Corporation (NASDAQ:CTAS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Cintas Corporation (NASDAQ:CTAS) going to take off soon? Prominent investors were cutting their exposure. The number of long hedge fund positions decreased by 11 in recent months. Cintas Corporation (NASDAQ:CTAS) was in 21 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that CTAS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 32 hedge funds in our database with CTAS holdings at the end of March.
If you’d ask most investors, hedge funds are seen as unimportant, old financial vehicles of years past. While there are more than 8000 funds in operation at the moment, Our researchers look at the upper echelon of this group, around 850 funds. These money managers watch over most of the hedge fund industry’s total asset base, and by observing their finest equity investments, Insider Monkey has revealed many investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Donald Sussman of Paloma Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a peek at the recent hedge fund action encompassing Cintas Corporation (NASDAQ:CTAS).
Do Hedge Funds Think CTAS Is A Good Stock To Buy Now?
At Q2’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -34% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in CTAS a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cintas Corporation (NASDAQ:CTAS) was held by Alkeon Capital Management, which reported holding $146.9 million worth of stock at the end of June. It was followed by Chilton Investment Company with a $137.7 million position. Other investors bullish on the company included Bristol Gate Capital Partners, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Lunia Capital allocated the biggest weight to Cintas Corporation (NASDAQ:CTAS), around 8.83% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, earmarking 4.65 percent of its 13F equity portfolio to CTAS.
Since Cintas Corporation (NASDAQ:CTAS) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there were a few funds that slashed their entire stakes in the second quarter. Intriguingly, Amit Nitin Doshi’s Harbor Spring Capital dumped the biggest investment of all the hedgies followed by Insider Monkey, comprising about $26.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $9.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 11 funds in the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cintas Corporation (NASDAQ:CTAS) but similarly valued. We will take a look at Sempra Energy (NYSE:SRE), CRH PLC (NYSE:CRH), SYSCO Corporation (NYSE:SYY), Pioneer Natural Resources Company (NYSE:PXD), Parker-Hannifin Corporation (NYSE:PH), O’Reilly Automotive Inc (NASDAQ:ORLY), and Marathon Petroleum Corp (NYSE:MPC). All of these stocks’ market caps are similar to CTAS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRE | 28 | 343994 | 1 |
| CRH | 9 | 90599 | 0 |
| SYY | 40 | 2600524 | -2 |
| PXD | 45 | 876323 | 8 |
| PH | 42 | 1446066 | -1 |
| ORLY | 44 | 2366019 | -1 |
| MPC | 48 | 2616162 | 2 |
| Average | 36.6 | 1477098 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1477 million. That figure was $539 million in CTAS’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 9 bullish hedge fund positions. Cintas Corporation (NASDAQ:CTAS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CTAS is 23.4. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on CTAS as the stock returned 11.7% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
Follow Cintas Corp (NASDAQ:CTAS)
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Disclosure: None. This article was originally published at Insider Monkey.
