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KAR Auction Services (KAR) Has Fallen 33% in Last One Year, Underperforms Market

Alex Smith
·3 min read

If you are looking for the best ideas for your portfolio you may want to consider some of Broyhill Asset Management's top stock picks. Broyhill Asset Management, an investment management firm, is bullish on KAR Auction Services Inc. (NYSE:KAR) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on KAR Auction Services Inc. (NYSE:KAR) stock. KAR Auction Services Inc. (NYSE:KAR) is a provider of whole car auction services.

On August 23, 2019, Broyhill Asset Management had released its Q2 2019 investor letter. KAR Auction Services Inc. (NYSE:KAR) stock has posted a return of -33.3% in the trailing one year period, underperforming the S&P 500 Index which returned 15.5% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, KAR Auction Services Inc. (NYSE:KAR) stock has fallen by 28.2%.

Let’s take a look at comments made by Broyhill Asset Management about KAR Auction Services Inc. (NYSE:KAR) stock in the Q2 2019 investor letter.

"The auto industry is perhaps the best example of how near-term cyclical concerns have dragged down multiples and how growing secular concerns have increased uncertainty across the sector. This dynamic can create compelling opportunities for investors who can distinguish between uncertainty (which can provide attractive entry points) and risk (which can be reduced by a lower purchase price). While the changes now occurring in the auto industry may appear sudden, the truth is that transportation has been evolving for centuries. Change can happen fast. It can also take longer to play out than expected, or it could play out completely different altogether. It’s this difference in expectations that creates opportunities amidst change. Our recent investment in KAR Auction Services (KAR), which we discussed at ValueX Vail, is a good illustration of this dynamic. That presentation is available here."

Used cars, used car, selling a used car
Used cars, used car, selling a used car

Copyright: sonyae / 123RF Stock Photo

In Q2 2020, the number of bullish hedge fund positions on KAR Auction Services Inc. (NYSE:KAR) stock increased by about 43% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with KAR's growth potential. Our calculations showed that KAR Auction Services Inc. (NYSE:KAR) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.