Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Cintas Corporation (NASDAQ:CTAS) and see how the stock is affected by the recent hedge fund activity.
Is Cintas Corporation (NASDAQ:CTAS) a buy, sell, or hold? Money managers are becoming less confident. The number of long hedge fund bets were trimmed by 2 lately. Our calculations also showed that CTAS isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let’s take a look at the latest hedge fund action encompassing Cintas Corporation (NASDAQ:CTAS).
What have hedge funds been doing with Cintas Corporation (NASDAQ:CTAS)?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in CTAS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Cintas Corporation (NASDAQ:CTAS), which was worth $137.5 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $77.8 million worth of shares. Moreover, Alkeon Capital Management, Citadel Investment Group, and Point72 Asset Management were also bullish on Cintas Corporation (NASDAQ:CTAS), allocating a large percentage of their portfolios to this stock.
Because Cintas Corporation (NASDAQ:CTAS) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few money managers who were dropping their positions entirely in the third quarter. At the top of the heap, Richard Chilton’s Chilton Investment Company said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $63.8 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund dumped about $59.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds in the third 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 FleetCor Technologies, Inc. (NYSE:FLT), Hewlett Packard Enterprise Company (NYSE:HPE), Rockwell Automation Inc. (NYSE:ROK), and Boston Properties, Inc. (NYSE:BXP). This group of stocks’ market values resemble CTAS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLT | 34 | 1733702 | 1 |
| HPE | 30 | 967419 | 1 |
| ROK | 28 | 534625 | -7 |
| BXP | 27 | 572101 | 10 |
| Average | 29.75 | 951962 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $952 million. That figure was $525 million in CTAS’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Boston Properties, Inc. (NYSE:BXP) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Cintas Corporation (NASDAQ:CTAS) is even less popular than BXP. Hedge funds clearly dropped the ball on CTAS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on CTAS as the stock returned 10.6% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
