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Here’s What Hedge Funds Think About Landstar System, Inc. (LSTR)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Landstar System, Inc. (NASDAQ:LSTR).

Landstar System, Inc. (NASDAQ:LSTR) was in 22 hedge funds’ portfolios at the end of June. LSTR has seen a decrease in activity from the world’s largest hedge funds of late. There were 23 hedge funds in our database with LSTR positions at the end of the previous quarter. Our calculations also showed that LSTR isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action surrounding Landstar System, Inc. (NASDAQ:LSTR).

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

Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in LSTR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

LSTR_oct2019

More specifically, Royce & Associates was the largest shareholder of Landstar System, Inc. (NASDAQ:LSTR), with a stake worth $66 million reported as of the end of March. Trailing Royce & Associates was Scopus Asset Management, which amassed a stake valued at $39.3 million. GLG Partners, AQR Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that Landstar System, Inc. (NASDAQ:LSTR) has experienced declining sentiment from hedge fund managers, we can see that there were a few funds who were dropping their entire stakes in the second quarter. Intriguingly, Robert Bishop’s Impala Asset Management said goodbye to the largest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $25 million in call options. Alexander Mitchell’s fund, Scopus Asset Management, also said goodbye to its call options, about $10.9 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds in the second quarter.

Let’s go over hedge fund activity in other stocks similar to Landstar System, Inc. (NASDAQ:LSTR). We will take a look at Aaron’s, Inc. (NYSE:AAN), Cinemark Holdings, Inc. (NYSE:CNK), Stericycle Inc (NASDAQ:SRCL), and Webster Financial Corporation (NYSE:WBS). This group of stocks’ market valuations match LSTR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAN 22 337253 2
CNK 22 197886 2
SRCL 16 648059 -6
WBS 22 364737 -3
Average 20.5 386984 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $387 million. That figure was $221 million in LSTR’s case. Aaron’s, Inc. (NYSE:AAN) is the most popular stock in this table. On the other hand Stericycle Inc (NASDAQ:SRCL) is the least popular one with only 16 bullish hedge fund positions. Landstar System, Inc. (NASDAQ:LSTR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on LSTR, though not to the same extent, as the stock returned 4.4% during the third quarter and outperformed the market as well.

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

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