5 Best Auto and Truck Dealership Stocks to Buy

3. CarMax, Inc. (NYSE:KMX)

Number of Hedge Fund Holders: 38

On April 11, CarMax, Inc. (NYSE:KMX) posted strong earnings for the fiscal fourth quarter of 2023. The company generated a revenue of $5.72 billion and reported earnings per share of $0.44, outperforming EPS expectations by $0.20. CarMax, Inc. (NYSE:KMX) is placed third on our list of the best auto and truck dealership stocks to buy now.

On April 14, Oppenheimer analyst Brian Nagel raised his price target on CarMax, Inc. (NYSE:KMX) to $85 from $75 and reiterated an Outperform rating on the shares. As of April 28, the stock has gained 15.48% year to date.

CarMax, Inc. (NYSE:KMX) was held by 38 hedge funds at the close of Q4 2022. These funds disclosed positions worth $932 million in the company. As of December 31, Diamond Hill Capital is the top shareholder and has a stake worth $327 million.

Alphyn Capital Management made the following comment about CarMax, Inc. (NYSE:KMX) in its Q1 2023 investor letter:

“Despite contributing positively to the portfolio, CarMax, Inc. (NYSE:KMX)’s performance ranked among the bottom five positions during a period when most of our holdings experienced gains.

CarMax suffers from difficult macro conditions coinciding with increased investment as car retail is increasingly moving online.

High prices (stemming from COVID-induced supply constraints on new cars and increased demand due to stimulus money filtered down to the used car market) have impacted used car affordability. Meanwhile, recent interest rate hikes have worsened the situation. CarMax has surrendered some market share to maintain gross margins in this more challenging market, while CarMax Auto Finance (CAF), which generates profits from the spread between auto loan rates charged to consumers and rates paid in securitization markets, has faced squeezed margins…’’ (Click here to read the full text)