Did Hedge Funds Drop The Ball On Cintas Corporation (CTAS) ?

Does Cintas Corporation (NASDAQ:CTAS) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Cintas Corporation (NASDAQ:CTAS) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of the second quarter of 2019. 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 Digital Realty Trust, Inc. (NYSE:DLR), Tencent Music Entertainment Group (NYSE:TME), and PACCAR Inc (NASDAQ:PCAR) to gather more data points.

According to most investors, hedge funds are perceived as worthless, old investment tools of yesteryear. While there are more than 8000 funds trading today, Our researchers choose to focus on the top tier of this group, about 750 funds. Most estimates calculate that this group of people control the lion’s share of all hedge funds’ total asset base, and by observing their top picks, Insider Monkey has unsheathed various investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .


Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the new hedge fund action regarding Cintas Corporation (NASDAQ:CTAS).

How are hedge funds trading Cintas Corporation (NASDAQ:CTAS)?

At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 34 hedge funds with a bullish position in CTAS a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

No of Hedge Funds with CTAS Positions

More specifically, Select Equity Group was the largest shareholder of Cintas Corporation (NASDAQ:CTAS), with a stake worth $138.1 million reported as of the end of March. Trailing Select Equity Group was Chilton Investment Company, which amassed a stake valued at $86.9 million. AQR Capital Management, Alkeon Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Cintas Corporation (NASDAQ:CTAS) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of money managers that elected to cut their positions entirely in the second quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management cut the biggest stake of all the hedgies followed by Insider Monkey, valued at close to $39.1 million in stock. Brad Dunkley and Blair Levinsky’s fund, Waratah Capital Advisors, also dropped its stock, about $23.4 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Cintas Corporation (NASDAQ:CTAS). These stocks are Digital Realty Trust, Inc. (NYSE:DLR), Tencent Music Entertainment Group (NYSE:TME), PACCAR Inc (NASDAQ:PCAR), and Sun Life Financial Inc. (NYSE:SLF). All of these stocks’ market caps match CTAS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DLR 18 264025 2
TME 11 160527 -9
PCAR 27 153937 4
SLF 11 183793 0
Average 16.75 190571 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $553 million in CTAS’s case. PACCAR Inc (NASDAQ:PCAR) is the most popular stock in this table. On the other hand Tencent Music Entertainment Group (NYSE:TME) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CTAS as the stock returned 13% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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