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Is Cintas Corporation (CTAS) A Good Stock To Buy?

During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. 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 right now? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund bets retreated by 3 recently. Our calculations also showed that CTAS isn’t among the 30 most popular stocks among hedge funds. CTAS was in 31 hedge funds’ portfolios at the end of the third quarter of 2018. There were 34 hedge funds in our database with CTAS positions at the end of the previous quarter.

To the average investor there are numerous metrics shareholders employ to assess their holdings. A duo of the most useful metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top fund managers can beat the broader indices by a significant margin (see the details here).

John Armitage Egerton Capital

We’re going to go over the latest hedge fund action encompassing Cintas Corporation (NASDAQ:CTAS).

How have hedgies been trading Cintas Corporation (NASDAQ:CTAS)?

Heading into the fourth quarter of 2018, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2018. On the other hand, there were a total of 32 hedge funds with a bullish position in CTAS at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CTAS_dec2018

More specifically, Arrowstreet Capital was the largest shareholder of Cintas Corporation (NASDAQ:CTAS), with a stake worth $177.2 million reported as of the end of September. Trailing Arrowstreet Capital was Egerton Capital Limited, which amassed a stake valued at $128.2 million. Select Equity Group, Chilton Investment Company, and Alkeon Capital Management 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 witnessed falling interest from the entirety of the hedge funds we track, logic holds that there were a few money managers that elected to cut their entire stakes in the third quarter. At the top of the heap, Seth Wunder’s Black-and-White Capital dumped the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $35 million in stock. D. E. Shaw’s fund, D E Shaw, also sold off its stock, about $12.6 million worth. These moves are interesting, as aggregate hedge fund interest fell by 3 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 Palo Alto Networks Inc (NYSE:PANW), Motorola Solutions Inc (NYSE:MSI), POSCO (NYSE:PKX), and WEC Energy Group, Inc. (NYSE:WEC). This group of stocks’ market values match CTAS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PANW 46 2889148 4
MSI 26 839297 6
PKX 14 157776 0
WEC 19 357766 4
Average 26.25 1060997 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.06 billion. That figure was $784 million in CTAS’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 14 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 PANW might be a better candidate to consider a long position.

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

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