Landstar is a good Ensemble stock and I always enjoyed your write-up/video(s) on it. The biz model is great, but given how deep is the downcycle for trucking, I feel like a higher beta name like Heartland Express might generate higher risk adjusted return.
Ingles is cheap, but the land thesis has been busted in prior examples including Seritage, a Buffett name and he lost hundreds of millions. Catalyst has no time horizon of materialization. Leon’s Furniture at least has the catalyst there about land sale and redevelopment so I’d probably prefer that (no position though).
Excellent points. I haven't followed Landstar in two years, so this was my first glance in a while. The drop in BCO count is worrisome and they haven't been executing as well as they should in terms of BCO recruiting/retention. Ultimately, I think Landstar's best placed as an acquisition for a firm with more operating leverage, higher capex needs, and seeking a FCF generating asset. As a standalone business, it's kind of like a bond with a variable coupon tied to spot rates - not ideal for someone who wants to bet on the trucking cycle (if you have a bold thesis, buy one of the higher beta/operating leverage names as you suggest).
On Ingles, yes, I'm skeptical of real estate-valuation unlocking theses especially when one person controls the decision and is young enough (late 50s) where he doesn't necessarily need to make a move anytime soon. The optionality value is low. Owning the real estate, however, can provide a cost advantage versus peers who have to pay higher rents in an in-demand region and provide some rental income to boot. My focus would be on the underlying grocery operations rather than the real estate value.
I've chased Ingles forever. Feels like a no-brainer once you realize they're intentionally obfuscating their real estate holdings. The stock ripped higher in 2020-2021 when they initiated a stock buyback -- I believe there were some value-focused activist investors pushing them at the time. The market reacted positively when it appeared management was taking investor feedback to heart. Since then, however, crickets. No buybacks, no increasing dividends, nothing.
It will be a good investment whenever they feel a little pressure again, but until then...
It's been a few months since I've dug in, but the business is essentially operated by Robert only, and there appears to be some strife with one of his siblings. She consistently sells shares (potentially living on the inheritance, which is her right of course.) I don't believe she's involved in the business at all.
Much of the real estate Ingles owns was owned by Robert at one point, and I've read the corporation paid above market value for some of it, essentially to provide him with cash without forcing him to sell any of his shares. Management disputes this, for the record.
I'll share this article, which I think is a bit hyperbolic, but it goes into detail about how Ingles holds vacant real estate to prevent competitors from entering their markets. Many local municipalities often cite them for lack of upkeep.
I wish I could find the exact quote, but I remember Robert saying publicly, recently, how the grocery chain is "lucky" to still be in business, and that Publix and Aldi are a serious threat in their markets going forward. Ingles has not opened a new location in a few years, the last time I checked.
It seems to me they are content to let it flounder, but again, it's so cheap that any sort of signal they're willing to play ball with investors will send the shares higher. (I'm not telling you anything you don't know, but preempting my own FOMO when it happens.)
Landstar is a good Ensemble stock and I always enjoyed your write-up/video(s) on it. The biz model is great, but given how deep is the downcycle for trucking, I feel like a higher beta name like Heartland Express might generate higher risk adjusted return.
Ingles is cheap, but the land thesis has been busted in prior examples including Seritage, a Buffett name and he lost hundreds of millions. Catalyst has no time horizon of materialization. Leon’s Furniture at least has the catalyst there about land sale and redevelopment so I’d probably prefer that (no position though).
Excellent points. I haven't followed Landstar in two years, so this was my first glance in a while. The drop in BCO count is worrisome and they haven't been executing as well as they should in terms of BCO recruiting/retention. Ultimately, I think Landstar's best placed as an acquisition for a firm with more operating leverage, higher capex needs, and seeking a FCF generating asset. As a standalone business, it's kind of like a bond with a variable coupon tied to spot rates - not ideal for someone who wants to bet on the trucking cycle (if you have a bold thesis, buy one of the higher beta/operating leverage names as you suggest).
On Ingles, yes, I'm skeptical of real estate-valuation unlocking theses especially when one person controls the decision and is young enough (late 50s) where he doesn't necessarily need to make a move anytime soon. The optionality value is low. Owning the real estate, however, can provide a cost advantage versus peers who have to pay higher rents in an in-demand region and provide some rental income to boot. My focus would be on the underlying grocery operations rather than the real estate value.
I've chased Ingles forever. Feels like a no-brainer once you realize they're intentionally obfuscating their real estate holdings. The stock ripped higher in 2020-2021 when they initiated a stock buyback -- I believe there were some value-focused activist investors pushing them at the time. The market reacted positively when it appeared management was taking investor feedback to heart. Since then, however, crickets. No buybacks, no increasing dividends, nothing.
It will be a good investment whenever they feel a little pressure again, but until then...
Thanks, Tyler. What's your sense of the family's priorities?
It's been a few months since I've dug in, but the business is essentially operated by Robert only, and there appears to be some strife with one of his siblings. She consistently sells shares (potentially living on the inheritance, which is her right of course.) I don't believe she's involved in the business at all.
Much of the real estate Ingles owns was owned by Robert at one point, and I've read the corporation paid above market value for some of it, essentially to provide him with cash without forcing him to sell any of his shares. Management disputes this, for the record.
I'll share this article, which I think is a bit hyperbolic, but it goes into detail about how Ingles holds vacant real estate to prevent competitors from entering their markets. Many local municipalities often cite them for lack of upkeep.
https://avlwatchdog.org/ingles-relies-on-real-estate-holdings-but-sometimes-leaves-properties-vacant-for-years/
I wish I could find the exact quote, but I remember Robert saying publicly, recently, how the grocery chain is "lucky" to still be in business, and that Publix and Aldi are a serious threat in their markets going forward. Ingles has not opened a new location in a few years, the last time I checked.
It seems to me they are content to let it flounder, but again, it's so cheap that any sort of signal they're willing to play ball with investors will send the shares higher. (I'm not telling you anything you don't know, but preempting my own FOMO when it happens.)