The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Cintas Corporation (NASDAQ:CTAS).
Cintas Corporation (NASDAQ:CTAS) shareholders have witnessed an increase in hedge fund interest in recent months. CTAS was in 37 hedge funds’ portfolios at the end of September. There were 27 hedge funds in our database with CTAS holdings at the end of the previous quarter. Our calculations also showed that CTAS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Last month we reported that an activist short seller is targeting CTAS, but CTAS shares shrugged off activists’ negative report and returned about 2% since then.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Richard Chilton of Chilton Investment Company
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the new hedge fund action surrounding Cintas Corporation (NASDAQ:CTAS).
What does smart money think about Cintas Corporation (NASDAQ:CTAS)?
At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 37% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in CTAS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Select Equity Group was the largest shareholder of Cintas Corporation (NASDAQ:CTAS), with a stake worth $112.3 million reported as of the end of September. Trailing Select Equity Group was Renaissance Technologies, which amassed a stake valued at $111.5 million. Chilton Investment Company, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Bristol Gate Capital Partners allocated the biggest weight to Cintas Corporation (NASDAQ:CTAS), around 4.51% of its portfolio. Harbor Spring Capital is also relatively very bullish on the stock, designating 3.4 percent of its 13F equity portfolio to CTAS.
Now, specific money managers have jumped into Cintas Corporation (NASDAQ:CTAS) headfirst. Millennium Management, managed by Israel Englander, established the largest position in Cintas Corporation (NASDAQ:CTAS). Millennium Management had $55 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $52.4 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace, Steve Cohen’s Point72 Asset Management, and Lee Ainslie’s Maverick Capital.
Let’s now review hedge fund activity in other stocks similar to Cintas Corporation (NASDAQ:CTAS). We will take a look at HP Inc. (NYSE:HPQ), PPG Industries, Inc. (NYSE:PPG), Sirius XM Holdings Inc (NASDAQ:SIRI), and TransDigm Group Incorporated (NYSE:TDG). This group of stocks’ market valuations match CTAS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HPQ | 38 | 2031394 | 6 |
| PPG | 27 | 421872 | 0 |
| SIRI | 33 | 1274312 | 4 |
| TDG | 56 | 5183262 | 8 |
| Average | 38.5 | 2227710 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $2228 million. That figure was $931 million in CTAS’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand PPG Industries, Inc. (NYSE:PPG) is the least popular one with only 27 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CTAS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CTAS investors were disappointed as the stock returned -3.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
