Do Hedge Funds Love Landstar System, Inc. (LSTR)?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Landstar System, Inc. (NASDAQ:LSTR) from the perspective of those successful funds.

Landstar System, Inc. (NASDAQ:LSTR)has seen an increase in enthusiasm from smart money lately. There were 16 hedge funds in our database with LSTR positions at the end of the previous quarter. 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 Vista Outdoor Inc (NYSE:VSTO), XPO Logistics Inc (NYSE:XPO), and National Health Investors Inc (NYSE:NHI) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

With all of this in mind, we’re going to check out the recent action regarding Landstar System, Inc. (NASDAQ:LSTR).

How are hedge funds trading Landstar System, Inc. (NASDAQ:LSTR)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, up 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in LSTR over the last 5 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in Landstar System, Inc. (NASDAQ:LSTR), worth close to $102.8 million, corresponding to 0.7% of its total 13F portfolio. The second largest stake is held by Fisher Asset Management, led by Ken Fisher, holding a $21.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions consist of D. E. Shaw’s D E Shaw, Joel Greenblatt’s Gotham Asset Management and Cliff Asness’s AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, some big names were breaking ground themselves. Jim Simons’ Renaissance Technologies initiated the biggest position in Landstar System, Inc. (NASDAQ:LSTR). The fund reportedly had $4.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $4.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Brian Taylor’s Pine River Capital Management and Benjamin A. Smith’s Laurion Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Landstar System, Inc. (NASDAQ:LSTR). These stocks are Vista Outdoor Inc (NYSE:VSTO), XPO Logistics Inc (NYSE:XPO), National Health Investors Inc (NYSE:NHI), and American Eagle Outfitters (NYSE:AEO). This group of stocks’ market values resemble LSTR’s market value.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $444 million. That figure was $179 million in LSTR’s case. American Eagle Outfitters (NYSE:AEO) is the most popular stock in this table. On the other hand National Health Investors Inc (NYSE:NHI) is the least popular one with only 10 bullish hedge fund positions. Landstar System, Inc. (NASDAQ:LSTR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AEO might be a better candidate to consider taking a long position in.

Disclosure: none.