Is Cintas Corporation (CTAS) a Smart Long-Term Buy?

Cooper Investors, an investment management firm, published its “Global Equities Fund (Hedged)” first quarter 2022 investor letter – a copy of which can be downloaded here. After a strong 2021, the Fund has endured a tough start to the year, returning -12.45%. In simple terms, the very narrow parts of the market doing well year to date (oil and gas, miners, some banks) are areas in which the fund is underweight, whereas many of the businesses we do own got dragged into a period of indiscriminate selling early in the quarter. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Cooper Investors Global Equities Fund mentioned Cintas Corporation (NASDAQ:CTAS) and explained its insights for the company. Founded in 1968, Cintas Corporation (NASDAQ:CTAS)  is a Cincinnati, Ohio-based business services company with a $42.2 billion market capitalization. Cintas Corporation (NASDAQ:CTAS)  delivered a -6.77% return since the beginning of the year, while its 12-month returns are up by 17.88%. The stock closed at $413.18 per share on April 18, 2022.

Here is what Cooper Investors Global Equities Fund has to say about Cintas Corporation (NASDAQ:CTAS) in its Q1 2022 investor letter:

“During the quarter the Fund established a position in Cintas Corporation, a market leader in uniform rental services across North America (Mcap $44bn). This service provides workwear for large corporate and government clients, for example managing supply and laundry of uniforms for the nationwide employee base of customers such as Home Depot.

Uniform rental is a tough local business (Cintas has a million customers) but management have built a high quality business operating with stable and growing recurring revenues and have consistently delivered for shareholders. They have the scale and a superior service offering which drives a unique and attractive return profile, including mid-to-high single digit sales growth, 40% returns on tangible funds employed, and earnings per share that have risen for an impressive 50 of the last 52 years.

The opportunity to invest arose following a 20% sell-down as Cintas was caught up in the sell down in stable compounding businesses during the quarter, despite no change in the outlook or fundamentals for the business.

We view Cintas as a well-positioned Stalwart that can successfully navigate the existing environment. They have the ability to leverage what is a dominant position to grow market share and raise pricing to align with inflation. Cintas could enter a strong period of growth as job openings are filled, manufacturing moves back onshore and the continued growth from service-based industries outsourcing their uniforms. Led by Chairman and descendent of the founder Scott Farmer (also the largest shareholder at 15% of the company) we expect Cintas to continue their track record as excellent operators over the short, medium and long term.”

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Our calculations show that Cintas Corporation (NASDAQ:CTAS) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Cintas Corporation (NASDAQ:CTAS) was in 42 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 36 funds in the previous quarter. Cintas Corporation (NASDAQ:CTAS) delivered a 3.96% return in the past 3 months.

In March 2022, we published an article that includes Cintas Corporation (NASDAQ:CTAS) in 5 Stocks Garnering Attention After Releasing Their Earnings Reports. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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