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Hedge Funds Have Never Been This Bullish On Cintas Corporation (CTAS)

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Cintas Corporation (NASDAQ:CTAS).

Cintas Corporation (NASDAQ:CTAS) shareholders have witnessed an increase in enthusiasm from smart money recently. Our calculations also showed that CTAS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the fresh hedge fund action surrounding Cintas Corporation (NASDAQ:CTAS).

Hedge fund activity in Cintas Corporation (NASDAQ:CTAS)

At Q4’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in CTAS a year ago. So, let’s examine 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 $100.2 million at the end of the third quarter. On the second spot was Chilton Investment Company which amassed $96.5 million worth of shares. AQR Capital Management, Alkeon Capital Management, and Millennium Management 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 4.59% of its 13F portfolio. Harbor Spring Capital is also relatively very bullish on the stock, earmarking 3.18 percent of its 13F equity portfolio to CTAS.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Junto Capital Management, managed by James Parsons, established the biggest position in Cintas Corporation (NASDAQ:CTAS). Junto Capital Management had $42.8 million invested in the company at the end of the quarter. Mikal Patel’s Oribel Capital Management also initiated a $12.7 million position during the quarter. The other funds with brand new CTAS positions are Vikas Lunia’s Lunia Capital, Peter Muller’s PDT Partners, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Cintas Corporation (NASDAQ:CTAS). We will take a look at Alcon Inc. (NYSE:ALC), Motorola Solutions Inc (NYSE:MSI), Eversource Energy (NYSE:ES), and Nutrien Ltd. (NYSE:NTR). This group of stocks’ market values are closest to CTAS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALC 24 705505 0
MSI 41 560978 4
ES 24 452875 2
NTR 28 408982 0
Average 29.25 532085 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $532 million. That figure was $821 million in CTAS’s case. Motorola Solutions Inc (NYSE:MSI) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Cintas Corporation (NASDAQ:CTAS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately CTAS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CTAS were disappointed as the stock returned -28.5% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
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.

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