Here’s Why Ensemble Capital Remains Optimistic in Landstar (LSTR) Despite Performing Poorly

Ensemble Capital, an investment management firm, published its “Ensemble Fund” second quarter 2021 investor letter – a copy of which can be seen here.  A quarterly portfolio net return of 6.93% was recorded by the fund for the second quarter of 2021, below the S&P Midcap 500 Index that delivered an 8.55% gains for the same period. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Ensemble Capital, the fund mentioned Landstar System, Inc. (NASDAQ: LSTR), and discussed its stance on the firm. Landstar System, Inc. is a Jacksonville, Florida-based transport company, that currently has an $5.9 billion market capitalization. LSTR delivered a 14.96% return since the beginning of the year, while its 12-month revenues are up by 27.99%. The stock closed at $154.80 per share on July 19, 2021.

Here is what Ensemble Capital has to say about Landstar System, Inc. in its Q2 2021 investor letter:

Landstar Systems: Landstar Systems provides freight trucking services. While flatbed trucks used to haul machinery and other heavy industrial loads (notably the sort of services needed to support US infrastructure programs) are still in recovery mode, van services used to move consumer goods have seen enormous demand causing load volumes and pricing to shoot higher. Landstar’s stock rallied dramatically in the first quarter but faded slightly in the second quarter, finishing down 4%, as the market began to anticipate what some investors believe is a cyclical peak in performance. While we may indeed have passed a short-term peak, we believe that the long-term shortage of truck drivers will keep the trucking market very much in truckers favor and that demand for both van and flatbed freight hauling will grow to new highs in the years ahead.”

States with the Best Roads in America


Based on our calculations, Landstar System, Inc. (NASDAQ: LSTR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Landstar System, Inc. was in 15 hedge fund portfolios at the end of the first quarter of 2021, compared to 18 funds in the fourth quarter of 2020. LSTR delivered a  -10.54% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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