Should You Avoid Cintas Corporation (CTAS)?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Cintas Corporation (NASDAQ:CTAS) from the perspective of those elite funds.

Is Cintas Corporation (NASDAQ:CTAS) undervalued? Hedge funds are in a bearish mood. The number of bullish hedge fund bets dropped by 1 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Cna Financial Corp (NYSE:CNA), Federal Realty Investment Trust (NYSE:FRT), and BorgWarner Inc. (NYSE:BWA) to gather more data points.

Today, there are a lot of methods investors put to use to size up their stock investments. Some of the most useful methods are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the market by a superb margin (see the details here).

Keeping this in mind, let’s analyze the fresh action surrounding Cintas Corporation (NASDAQ:CTAS).

What does the smart money think about Cintas Corporation (NASDAQ:CTAS)?

Heading into Q4, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 4% from the previous quarter. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Cintas Corporation (NASDAQ:CTAS). AQR Capital Management has a $135 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Mark Wolfson and Jamie Alexander of Jasper Ridge Partners, with a $55.3 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish contain David Harding’s Winton Capital Management, Joel Greenblatt’s Gotham Asset Management, and Clifford Fox’s Columbus Circle Investors.

Due to the fact that Cintas Corporation (NASDAQ:CTAS) has experienced a falling interest from the aggregate hedge fund industry, logic holds that there were a few fund managers that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management sold off the largest position of the 700 funds monitored by Insider Monkey, totaling an estimated $16.7 million in stock. Andy Redleaf’s fund, Whitebox Advisors, also dumped its stock, about $3 million worth of shares. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cintas Corporation (NASDAQ:CTAS) but similarly valued. These stocks are Cna Financial Corp (NYSE:CNA), Federal Realty Investment Trust (NYSE:FRT), BorgWarner Inc. (NYSE:BWA), and The Western Union Company (NYSE:WU). All of these stocks’ market caps are closest to Cintas Corporation (NASDAQ:CTAS)’s market cap.

As you can see, these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $407 million. That figure was $1.04 billion in Cintas Corporation (NASDAQ:CTAS)’s case. BorgWarner Inc. (NYSE:BWA) is the most popular stock in this table. On the other hand, Cna Financial Corp (NYSE:CNA) is the least popular one with only 11 bullish hedge fund positions. Cintas Corporation (NASDAQ:CTAS) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, BorgWarner Inc. (NYSE:BWA) might be a better candidate to consider a long position.