Reasons for the Fall of Aramark (ARMK) in Q3

Artisan Partners, an investment management company, released its “Artisan Select Equity Fund” third quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, Investor Class: ARTNX returned -4.77%, its Advisor Class: APDNX returned -4.77%, and Institutional Class: APHNX returned -4.71% compared to S&P 500 Index’s -3.27% return. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Artisan Select Equity Fund highlighted stocks like Aramark (NYSE:ARMK) in the third quarter 2023 investor letter. Headquartered in Philadelphia, Pennsylvania, Aramark (NYSE:ARMK) offers food and facilities services. On November 29, 2023, Aramark (NYSE:ARMK) stock closed at $27.78 per share. One-month return of Aramark (NYSE:ARMK) was -0.32%, and its shares lost 8.16% of their value over the last 52 weeks. Aramark (NYSE:ARMK) has a market capitalization of $7.265 billion.

Artisan Select Equity Fund made the following comment about Aramark (NYSE:ARMK) in its Q3 2023 investor letter:

“Aramark (NYSE:ARMK) was our weakest performer this quarter. The company reported strong Q2 results. Revenue grew 15%, and operating margins expanded. Both the contract catering and uniforms divisions showed good progress, and the company raised its guidance for the year. We suspect the share price performed poorly for a couple of reasons. First, the company has a fair bit of debt, and interest expense will increase if the debt is refinanced at today’s higher rates rather than paid down. However, the company is focused on debt reduction and does not pay a large dividend, giving it ample resources to pay down its debt. Second, the company spun off its uniform business to shareholders at the end of the quarter. This business is more cyclical than the catering business, and it came to market with a high degree of financial leverage. With fears around a recession, we believe investors steered clear of Aramark for lack of interest in the uniform business. We immediately sold our shares in the uniform business, Vestis, given its cyclicality and leverage. As of this writing, Vestis’ shares were down more than 20%.”

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Aramark (NYSE:ARMK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Aramark (NYSE:ARMK) at the end of third quarter which was 25 in the previous quarter.

We discussed Aramark (NYSE:ARMK) in another article and shared stock picks of Farallon Capital. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.