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Is Landstar System, Inc. (LSTR) A Good Stock To Buy?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Landstar System, Inc. (NASDAQ:LSTR).

Is Landstar System, Inc. (NASDAQ:LSTR) worth your attention right now? Money managers are reducing their bets on the stock. The number of bullish hedge fund bets fell by 3 lately. Our calculations also showed that LSTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action encompassing Landstar System, Inc. (NASDAQ:LSTR).

How have hedgies been trading Landstar System, Inc. (NASDAQ:LSTR)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter of 2019. On the other hand, there were a total of 28 hedge funds with a bullish position in LSTR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Landstar System, Inc. (NASDAQ:LSTR), which was worth $65 million at the end of the third quarter. On the second spot was GLG Partners which amassed $34.8 million worth of shares. Scopus Asset Management, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Scopus Asset Management allocated the biggest weight to Landstar System, Inc. (NASDAQ:LSTR), around 1.04% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.6 percent of its 13F equity portfolio to LSTR.

Seeing as Landstar System, Inc. (NASDAQ:LSTR) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few money managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Renaissance Technologies sold off the largest position of the 750 funds followed by Insider Monkey, valued at an estimated $16.5 million in stock, and Robert Pohly’s Samlyn Capital was right behind this move, as the fund dropped about $9.9 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Landstar System, Inc. (NASDAQ:LSTR). These stocks are The Macerich Company (NYSE:MAC), Selective Insurance Group, Inc. (NASDAQ:SIGI), W.R. Grace & Co. (NYSE:GRA), and MGIC Investment Corporation (NYSE:MTG). This group of stocks’ market caps match LSTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAC 22 136466 1
SIGI 24 120207 10
GRA 38 1653754 2
MTG 39 566495 4
Average 30.75 619231 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $619 million. That figure was $191 million in LSTR’s case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand The Macerich Company (NYSE:MAC) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Landstar System, Inc. (NASDAQ:LSTR) is even less popular than MAC. Hedge funds dodged a bullet by taking a bearish stance towards LSTR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately LSTR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); LSTR investors were disappointed as the stock returned -0.9% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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