Hedge Funds Are Selling Cintas Corporation (CTAS)

Is it smart to be bullish on Cintas Corporation (NASDAQ:CTAS)?

If you were to ask many market players, hedge funds are perceived as overrated, old investment tools of a forgotten age. Although there are In excess of 8,000 hedge funds with their doors open today, Insider Monkey aim at the moguls of this group, around 525 funds. Analysts calculate that this group oversees most of the hedge fund industry’s total capital, and by monitoring their best stock picks, we’ve brought to light a few investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Just as useful, optimistic insider trading activity is another way to look at the financial markets. As the old adage goes: there are many incentives for a bullish insider to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the valuable potential of this method if piggybackers understand what to do (learn more here).

Now that that’s out of the way, we’re going to discuss the newest info about Cintas Corporation (NASDAQ:CTAS).

How have hedgies been trading Cintas Corporation (NASDAQ:CTAS)?

In preparation for the third quarter, a total of 15 of the hedge funds we track were bullish in this stock, a change of -6% from the first quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes significantly.

When using filings from the hedgies we track, First Eagle Investment Management, managed by Matt McLennan, holds the biggest position in Cintas Corporation (NASDAQ:CTAS). First Eagle Investment Management has a $778.5 million position in the stock, comprising 2.4% of its 13F portfolio. Sitting at the No. 2 spot is David Harding of Winton Capital Management, with a $25.8 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish include Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management.

As Cintas Corporation (NASDAQ:CTAS) has experienced bearish sentiment from the smart money’s best and brightest, it’s safe to say that there lies a certain “tier” of money managers who were dropping their positions entirely last quarter. Intriguingly, Israel Englander’s Catapult Capital Management said goodbye to the largest stake of all the hedgies we watch, valued at close to $2.6 million in stock. Peter Rathjens Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $1.5 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds last quarter.

How have insiders been trading Cintas Corporation (NASDAQ:CTAS)?

Insider buying is best served when the company in focus has experienced transactions within the past half-year. Over the latest 180-day time frame, Cintas Corporation (NASDAQ:CTAS) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Cintas Corporation (NASDAQ:CTAS). These stocks are Rollins, Inc. (NYSE:ROL), Alliance Data Systems Corporation (NYSE:ADS), Global Payments Inc (NYSE:GPN), FleetCor Technologies, Inc. (NYSE:FLT), and Vantiv Inc (NYSE:VNTV). This group of stocks are in the business services industry and their market caps match CTAS’s market cap.

Using the returns explained by the previously mentioned research, average investors must always track hedge fund and insider trading activity, and Cintas Corporation (NASDAQ:CTAS) shareholders fit into this picture quite nicely.

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