We recently published a list of 12 Best Freight Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Landstar System, Inc. (NASDAQ:LSTR) stands against other best freight stocks to buy according to hedge funds.
Freight stocks are often perceived as boring if compared to the flashy technology and AI stocks, but they are actually the blood of the global economy – the freight sector is the backbone of trade and the gross domestic product of every country. In essence, any good produced and sold was almost certain to have been involved in transportation, often several times at different stages of the supply chain. This means that freight companies are able to capture a small share of the giant gross domestic product, which makes the overall sector a huge size.
The key growth drivers of freight activity are trade volumes, fuel prices (cheap fuel is a huge profitability boost), public spending on large projects like infrastructure, and the level of manufacturing activity. Consequently, freight stocks thrive during periods of strong economic growth, supported by affordable energy prices and low interest rates, as well as a calm geopolitical landscape that ensures the free flow of goods. Conversely, the whole transportation sector tends to underperform during sluggish economic conditions, featuring mediocre construction and manufacturing activities, slowdowns in both public and private spending, and other macro headwinds like high interest rates and inflation, which pressure consumption on a large scale.
READ ALSO: 10 Best Transportation Stocks to Buy According to Hedge Funds
The year 2024 was not the best for freight activity in the US, as almost 2 years of high interest rates and past inflation finally took a toll on consumption, industrial activity, and construction. Last year, while strong from a valuation standpoint and stock market returns, it actually brought a significant slowdown in consumer spending, residential construction, automotive volumes, and industrial production. There were pockets of strength in data center construction, public construction (as fueled by the Infrastructure Act), and some industrial niches, but that was not enough to fuel growth for freight stocks. As a result, the whole sector underperformed the broad market and reached a new 5-year low (relative to the broad market) by year-end. Furthermore, the new US administration brought even more challenges into 2025 – the cut in public spending is likely to eliminate some of the pockets of strength mentioned above, while the tariff threats are a huge headwind for commerce and the flow of goods.
The Atlanta Fed and other reputable research boutiques have drastically cut their estimates of GDP growth for 2025, which puts transportation stocks out of favor again. However, according to the principles of value investing, the trough of the business cycle, when stocks are trading at or near their lows, is the best time to acquire good companies at exceptional prices. As legendary investors like Warren Buffet and Peter Lynch have taught us, valuations certainly do matter for long-term stock returns, meaning that periods of underperformance are opportunities to acquire stocks at bargain prices.
We also believe that the long-term picture remains favorable, and there are reasons to expect a reacceleration in GDP growth and freight volumes at some point in 2H 2025 or 2026, once the current challenges are navigated. The main reason for long-term optimism is that the outlook on the construction sector is favorable due to a chronically undersupplied residential housing market and the aging of infrastructure in the US. Second, industrial activity will also have to rebound at some point, and we believe that lower interest rates over time will unmute the “Roaring 2020s” tailwinds in such areas as electric vehicle production, energy grid, and automation – all of these will bring higher volumes for the freight sector. The key takeaway for readers is that we may be at an opportune time to acquire freight stocks at bargain prices ahead of a broad economic recovery over the next 1-2 years.
Our Methodology
We used a stock screener and thematic ETFs to shortlist 40-50 companies operating in the freight space, which includes the “Integrated Freight & Logistics” and “Trucking” industries. Then we compared the list with our proprietary database of hedge funds’ ownership and included in the article the top 12 stocks with the largest number of hedge funds owning the stock as of Q4 2024. All stocks are ranked in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A long line of cargo trucks driving on a highway, illustrating the transportation services provided by the company.
Landstar System, Inc. (NASDAQ:LSTR)
Number of Hedge Fund Holders: 29
Landstar System, Inc. (NASDAQ:LSTR) is a non-asset-based provider of integrated transportation management solutions operating across the United States, Canada, Mexico, and internationally. The company delivers services through a network of independent commission sales agents and third-party capacity providers. LSTR offers a range of transportation services, including truckload, less-than-truckload, intermodal, air, and ocean freight, utilizing various equipment types such as dry vans, flatbeds, and temperature-controlled trailers. The company’s asset-light model enables flexibility and scalability in meeting diverse customer needs across multiple industries.
Landstar System, Inc. (NASDAQ:LSTR) delivered exceptional revenue performance in Q4 2024, with results slightly ahead of the midpoint of guidance, despite a challenging freight environment characterized by soft demand and readily available truck capacity. The company achieved record heavy haul revenue performance during the fiscal year 2024, driven by a 9% increase in heavy haul revenue per load and a 3% increase in heavy haul volume. The Q4 also saw a 3.1% increase in overall truck revenue per load compared to the prior year, primarily attributable to an 8% increase in unsided/platform revenue per load.
Looking ahead, while the freight environment remains challenging, Landstar System, Inc. (NASDAQ:LSTR) maintains a strong balance sheet and continues to generate significant free cash flow through its variable-cost business model. The company expects the business environment to remain challenging throughout the first half of 2025, though it remains focused on executing strategic initiatives and positioning for future growth when market conditions improve. Management deployed over $82 million toward stock buybacks in the fiscal 2024 and declared a $2 per share special dividend in Q4. With such an outstanding capital allocation strategy and a strong balance sheet, LSTR is one of the best freight stocks to own ahead of a potential recovery in transportation activity.
Overall, LSTR ranks 12th on our list of best best freight stocks to buy according to hedge funds. While we acknowledge the potential of LSTR, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than LSTR but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.