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Landstar System, Inc. (NASDAQ:LSTR): Are Hedge Funds Right About This Stock?

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

And so, we were wondering, is Landstar System, Inc. (NASDAQ:LSTR) a great stock to buy now? Money managers are taking a bullish view. The number of bullish hedge fund bets improved by 5 lately. LSTR was in 28 hedge funds’ portfolios at the end of the third quarter of 2018 up from 23 hedge funds  long the stock end of the previous quarter. Even though Landstar System Inc has seen an increased interest coming from hedge funds lately, and some of its investors belong to the wealthy elite, such as Israel Englander’s Millennium Management, the stock is still far from being the most popular with billionaires (to see which stocks made the cut, read the list of  30 stocks billionaires are crazy about: Insider Monkey billionaire stock index). However, neither increased hedge fund enthusiasm about the stock, neither the small number of the wealthiest investors long it are giving us enough clues to make a final call on this stock. To determine if the company is worth purchasing we’ll study it further.

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 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

While researching about Landstar System, Inc. (NASDAQ:LSTR), among other things, we found out that the stock was recently added to VulcanValue Partners’ equity portfolio and the fund discussed this addition in its investor letter:
“Landstar operates in the trucking industry. Their proprietary technology platform acts as a freight market maker. Their large customer base attracts trucking capacity which in turn attracts even more shipping customers, creating and reinforcing a strong network effect. It invests substantial capital in IT infrastructure, and switching costs are high as their systems tend to be integrated with both sides of the network. We were happy to have the opportunity to add this great company to the portfolio during the quarter.”

While VulcanValue Partners thinks of the stock as a good buy, we’ll need more evidence, which is why we’ll examine the stock further more.

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

At Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in LSTR heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).


Among these funds, Royce & Associates held the most valuable stake in Landstar System, Inc. (NASDAQ:LSTR), which was worth $111.9 million at the end of the third quarter. On the second spot was Millennium Management which amassed $28.1 million worth of shares. Moreover, AQR Capital Management, D E Shaw, and GLG Partners were also bullish on Landstar System, Inc. (NASDAQ:LSTR), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, specific money managers have jumped into Landstar System, Inc. (NASDAQ:LSTR) headfirst. Impax Asset Management, managed by Ian Simm, initiated the largest position in Landstar System, Inc. (NASDAQ:LSTR). Impax Asset Management had $2.1 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $1.2 million position during the quarter. The other funds with brand new LSTR positions are Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Matthew Tewksbury’s Stevens Capital Management, and Mike Vranos’s Ellington.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Landstar System, Inc. (NASDAQ:LSTR) but similarly valued. These stocks are Lions Gate Entertainment Corp. (NYSE:LGF-A), IDACORP, Inc. (NYSE:IDA), Woodward, Inc. (NASDAQ:WWD), and MSC Industrial Direct Co., Inc. (NYSE:MSM). 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
LGF-A 17 476276 0
IDA 11 182148 -1
WWD 14 192547 2
MSM 19 115118 -3

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $270 million in LSTR’s case. MSC Industrial Direct Co., Inc. (NYSE:MSM) is the most popular stock in this table. On the other hand IDACORP, Inc. (NYSE:IDA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Landstar System, Inc. (NASDAQ:LSTR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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