CarMax (KMX) Has Competitive Advantage, Ability to Increase New Stores by 60% and Grow 20% for Many Years, According to Portfolio Manager Francois Rochon

Wall Street Transcript

67 WALL STREET, New York - April 22, 2013 - The Wall Street Transcript has just published its Investing in Energy, MLPs and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Portfolio Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Value Investing, Long-Term Investing, High Quality Companies, Investment Strategies, Large Cap Investing, Investing in Energy, Oil and Gas

Companies include: Wells Fargo & Company (WFC), M&T Bank Corp. (MTB), Bank of the Ozarks, Inc. (OZRK), Fastenal Co. (FAST), CarMax Inc. (KMX), Walt Disney Co. (DIS), Union Pacific Corp. (UNP), Berkshire Hathaway Inc. (BRK-A), JPMorgan Chase & Co. (JPM) and many more.

In the following excerpt from the Investing in Energy, MLPs and Other Strategies Report, a portfolio manager discusses his investment philosophy and his portfolio-construction strategy:

TWST: Let's talk about something you've held for a long time. Would you take us through how you got in and why you stayed so long on a particular stock?

Mr. Rochon: What we really like about CarMax is they really changed the industry, which was mostly dominated by moms-and-pops for many, many years. They offer consumers a very good deal, and a very good guarantee. They buy their cars at a very good rate.

So for the consumer, I think it's a much better experience owning used cars. And even though they have 119 large super stores, they still have less than 3% of the market. It's very fragmented, it's a very big market, and we think they really have a very big competitive advantage.

For a few years during the recession they put their new store opening program on hold, but lately they started to open new stores. We think they can probably increase new stores by 50% to 60% in the next five years. And they've been profitable every year. Even during the recession, they've been profitable. Since we bought it, earnings have doubled.

So they've been growing very well even during this very tough environment, and we think they can continue to grow 15% to 20% for many years. Thomas Folliard, the CEO, is young, 48, and we think he has been implementing the right culture. His growth plans are promising.

TWST: And just to get an insight into your process, what happened in 2007? What made it look like a value at that point?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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