4. Old Dominion Freight Line, Inc. (NASDAQ:ODFL)
No of HFs: 47
Total Value of HF Holdings: $787 Million
At the end of the third quarter, a total of 47 hedge funds tracked by Insider Monkey were bullish on this stock. The top hedge fund holder of this stock is Cliff Asness’ AQR Capital Management which had $135 million invested in the stock at the end of September. Wedgewood Partners talked about ODFL in its Q2 2019 investor letter:
“We have decided to liquidate our holdings in Old Dominion Freight Lines in order to pursue opportunities elsewhere. We remain impressed with Old Dominion’s best-in-class business model and with the quality of its management team and operations, so we wouldn’t call this sale a vote against the Company. Results have been quite good while we have owned this company, although the market has lost interest in the broad transportation industry generally. Macroeconomic doubts, driven in large part by uncertain international trade dynamics, have weighed on sentiment. In addition, tremendously strong results from Old Dominion in 2018 – partially before we owned the company, and partially during our ownership – have created very difficult year-over-year comparisons. While, of course, this has been no surprise to us, we believe this also has weighed on sentiment to some degree.
As a reminder on 2018, the tremendous strength in Old Dominion’s business (which created difficult comparisons for 2019) was driven by a few issues above typical macroeconomic factors:
- Old Dominion, like other Less-than-Truckload (LTL) carriers, has significant industrial exposure, and changes to U.S. tax law at the beginning of 2018 drove incremental industrial strength and increased capital investment, both of which provided additional juice to Old Dominion’s already thriving industrial business.
- The extreme shortage of capacity in the Truckload (TL) industry, driven by Electronic Logging Device (ELD) mandate we’ve discussed extensively, actually caused some traditional Truckload business to slip into Less-than-Truckload, especially toward the end of 2017 and in the first half of 2018. This had been nearly unheard of in trucking previously. As the Truckload industry and its customers adjusted to the lower level of TL capacity over the course of several quarters, this particular anomaly has reverted to normal, with the overflow of capacity into LTL disappearing.
Unlike our holding C.H. Robinson, which has been and will remain a primary beneficiary of the shrinking capacity in the Truckload industry over the long term, the fundamental drivers of Old Dominion’s business model have been more purely cyclical in nature. As a result, we have chosen to retain our C.H. Robinson position while liquidating Old Dominion in favor of other recent buys and additions, such as Motorola Solutions and Ross Stores, both of which present growth opportunities which are less cyclical in nature.”
