Should You Consider Reducing Your Position in CarMax (KMX)?
Ruane, Cunniff & Goldfarb, an investment adviser managing Sequoia Fund, released its Q4 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund returned 13.31% compared to an 11.69% return for the S&P 500 Index. The fund generated a 27.83% return in 2023 compared to a 26.29% return for the index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Sequoia Fund featured stocks like CarMax, Inc. (NYSE:KMX) in the fourth quarter 2023 investor letter. Headquartered in Richmond, Virginia, CarMax, Inc. (NYSE:KMX) is a used vehicle retailer. On March 19, 2024, CarMax, Inc. (NYSE:KMX) stock closed at $80.85 per share. One-month return of CarMax, Inc. (NYSE:KMX) was 14.49%, and its shares gained 40.71% of their value over the last 52 weeks. CarMax, Inc. (NYSE:KMX) has a market capitalization of $12.768 billion.
Sequoia Fund stated the following regarding CarMax, Inc. (NYSE:KMX) in its fourth quarter 2023 investor letter:
"Two additional trims, in Meta and CarMax, Inc. (NYSE:KMX), were more substantive in nature. As for Carmax, we reduced our shareholding over the back half of last year. In the used car business, Carmax has no equal, and enjoys an enviable multi-decade track record of growth. The company continues to refine its omnichannel business model, which allows customers to engage physically and/or digitally throughout the entire purchase journey. We believe Carmax’s omnichannel transformation is strategically sound, but the magnitude and pace of investment has pressured earnings to a greater extent than we anticipated.
Carmax is also navigating a weak used car market. The primary culprit is elevated used car prices, which are taking their cue from elevated new car prices. This situation is sure to normalize, but there is no guarantee that it will do so quickly, nor is there any guarantee that a general economic downturn will not sap used-car demand in the meantime. Ultimately, we are comfortable with a reduced weighting in Carmax given the evolving business model, cyclical exposure, and a valuation that we view as attractive but not disproportionately so relative to our other holdings."
A happy customer inspecting a newly purchased used car with the help of a sales assistant.
CarMax, Inc. (NYSE:KMX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, CarMax, Inc. (NYSE:KMX) was held by 38 hedge fund portfolios, compared to 35 in the previous quarter, according to our database.
We discussed CarMax, Inc. (NYSE:KMX) in another article and shared the list of best car stocks to invest in. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
