Cheap Gasoline Is Not Enough to Get Hedge Funds Into Trucking Stocks

Lower oil prices over the last two years was expected to benefit the trucking industry. However, entering into 2016, analysts were bearish on the industry as it faced more headwinds. One of the main reasons why the industry cannot capitalize on lower oil prices is the increased availability of trucks in the spot market and this is why analysts were bearish on the trucking industry at the beginning of the year.

Given the outlook for the industry, it is not surprising that hedge funds have not been particularly bullish on the sector. However, companies such as Swift Transportation Co (NYSE:SWFT), J B Hunt Transport Services Inc (NASDAQ:JBHT), Old Dominion Freight Line (NASDAQ:ODFL), YRC Worldwide Inc (NASDAQ:YRCW), and Landstar System, Inc. (NASDAQ:LSTR), still remained popular among hedge funds.

While there are many metrics that investors can assess in the investment process, hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor beat the S&P 500 by around 95 basis points per month (see more details here).

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Swift Transportation Co (NYSE:SWFT) saw 30 funds from our database long its shares at the end of June, down from 32 funds a quarter earlier. The total value of their holdings decreased to $380.97 million from $404.27 million, but still represented over 18% of the company’s outstanding stock. The stock gained over 11% in the first half of 2016, but it is up by more than 50% year-to-date. Last month, Swift Transportation announced that its founder and CEO Jerry Moyes would retire, effective December 31 and will be succeeded by the company’s current President and COO Richard Stocking. Moyes though will continue to serve on the company’s Board. Swift Transportation Co (NYSE:SWFT) is scheduled to release its third-quarter financial results in October 24 and analysts estimate earnings of $0.32 per share on revenue of $1.03 billion.

J B Hunt Transport Services Inc (NASDAQ:JBHT) had 28 funds tracked by us holding shares with a total value of $230.42 million at the end of the second quarter. This compares with 27 funds with stakes worth $303.04 million at the end of March. Shares of J B Hunt advanced by 10% year-to-date and are currently trading at over 21 times earnings, which is slightly higher than the industry average.  J B Hunt Transport Services Inc (NASDAQ:JBHT) is scheduled to release its third-quarter results on October 17 and the consensus among analysts is for earnings of $1.03 per share and revenue is expected to come in at $1.68 billion.

Read about three other trucking stocks that have hedge funds have a small position in on the next page.

The number of investors from our database long Old Dominion Freight Line (NASDAQ:ODFL) increased to 24 from 18 during the second quarter, but the total value of their holdings slid to $140.95 million from $217.67 million and represented just 2.80% of the float at the end of June. The stock is up by over 19% since the beginning of the year, mainly due to gains registered since the beginning of July. The company’s second-quarter results managed to beat estimates for both EPS and revenue for the first time in five quarters. Old Dominion Freight Line (NASDAQ:ODFL) reported earnings of $0.98 per share, beating the consensus estimate of $0.95 per share, while its revenue of $755.44 million, was down by 0.9% on the year, but topped the expectations by $1.35 million.

In YRC Worldwide Inc (NASDAQ:YRCW) the number of long positions declined by three to 20 during the April-June period, while the total value of these holdings fell to $76.21 million from $90.66 million and represented 26% of the float. Among the five stocks discussed in this article, YRC Worldwide is the only stock in this list that is trading in the red year-to-date. The stock has lost 12% since the beginning of the year, mainly due to a 30% drop in the first two months amid the company reporting a loss of $0.73 per share for the fourth quarter of 2015, compared to expected profit of $0.20 per share. YRC Worldwide Inc (NASDAQ:YRCW) will report its financial results for the third quarter on October 27 and the consensus among analysts includes earnings of $0.54 per share on revenue of $1.22 billion.

Among the funds in our database, 16 funds amassed $193.04 million worth of Landstar System, Inc. (NASDAQ:LSTR) shares at the end of the second quarter, compared to 17 funds holding $209.60 million worth of stock a quarter earlier. The stock is up by 14% year-to-date and sports a dividend of 0.54%, which makes him the second of the two dividend-paying stocks in this list (the first one is J B Hunt). Landstar System, Inc. (NASDAQ:LSTR) reported a profit of $0.76 per share for the second quarter, missing the consensus forecast of $0.81 per share. Its revenue of  $775.22 million declined by 10.7% on the year and also missed analyst expectations by $12.69 million.

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