Landstar's Engine Is Rumbling

On Monday, of course, the market dallied on low summer volume during the morning, then surrendered to the bears and tumbled south in the afternoon. On days like these, I'm always impressed by the occasional stock that cheerfully ignores the market's angst and gallops happily higher -- right into the closing bell. I'm even more impressed when that company shows good fundamentals, and when the stock is forming a pattern on a daily chart that offers me a favorable entry price. The stock that met the above description is Landstar Systems (LSTR). Founded in 1968 and headquartered in Jacksonville, Fla., Landstar owns a unique position in the road-and-rail industry: The company is a non-asset broker that relies on an owner-operated fleet and independent drivers. This model works well in slow economies, as the firm does not own the trucks or other transportation vehicles. Landstar operates in two segments -- transportation logistics and insurance. The first segment provides truck, rail intermodal, air cargo, ocean cargo, and heavy-haul specialized transportation, as well as supply chain solutions to industries from chemicals to military hardware. The insurance division provides risks and claims services to shippers. While Landstar has reported slightly declining revenues in the last quarter, its current debt-to-equity ratio is 0.37, which is low and shows management has successfully managed debt levels. Further, Landstar's return on equity comes to 31.68%. That significantly exceeds both the industry average at 19.03%, and the S&P 500 mean of 18.94%. If we look at a daily chart of Landstar, we see a strong pattern forming that could lead the stock higher. This year, the price touched a Jan. 28 overbought high -- and all-time high -- of $59.97. That was the good news. The stock slid lower from there to February lows of $53.34. Consolidation ensued in March and April, but the stock gave up more ground into May. Then, except for brief rallies in May and June, price continued to slip south until it reached June 26 low of $50.39. That was the bad news. Landstar (LSTR) -- Daily Source: RealTick View Chart » View in New Window » Since then, however, the transportation company has reversed and driven higher, creating an orderly uptrend. Note that its 14-day relative-strength index is also trending nicely higher, a good signal. The price is also trading above its rising 20-day moving average (red on chart), as well as its 50-day (green) and 200-day (black) MAs. Note that the 50-day MA is rising up from beneath the 200-day line. Assuming that Landstar continues higher, the 50-day should cross above the 200-day MA shortly. The stock looks ready to break above its current base. Monday's close -- on increased volume -- was $55.10. If Landstar can continue to ignore possible future down moves by the broader market, I will consider purchasing one-third to one-half of my intended position in an entry window of $54.80 to $55.40. Should Landstar close above nearby (Aug. 1) resistance at $56.20, I will add the remaining shares to my position. My initial protective stop (trail) will be established at $53.50, below the 200-day MA. My first profit target is $57, and my second is $59. That said, Landstar's all-time high was the January high of $59.97, which I mentioned earlier in the article. If our economy can continue to improve, the company's solid financial position may turn out to be a great position -- for the long haul.

Landstar's Engine Is Rumbling

The stock looks liable to reverse, and the company sports fine fundamentals.

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