5 Best Used Car Stocks To Invest In

4. CarMax, Inc. (NYSE:KMX)

Number Of Hedge Fund Holders: 35

CarMax, Inc. (NYSE:KMX) is a Virginia-based used vehicle retailer that operates two business segments: CarMax Sales Operations and CarMax Auto Finance. With 220 locations across the country, it is also one of the nation’s largest auctioneers of vehicles.

During the fiscal year 2021, CarMax, Inc. (NYSE:KMX) sold over 750,000 vehicles, maintaining one of the largest used-vehicle financing arms, with just over 1 million customer accounts amounting to $13.85 billion in receivables. Additionally, the company expects to increase this amount to 2 million by 2026, representing over 5% of the used auto market share in the United States.

Among the hedge funds tracked by Insider Monkey, 36 were bullish on CarMax, Inc. (NYSE:KMX) at the end of the fourth quarter of 2021, with aggregate positions worth $1.62 billion. Virginia-based investment firm Akre Capital Management is a leading shareholder in CarMax, Inc. (NYSE:KMX) with 7.2 million shares worth more than $949 million.

Fiduciary Management, an investment management firm, mentioned CarMax, Inc. (NYSE:KMX) in its “Large Cap Equity Fund” first quarter 2022 investor letter. Here is what the fund said:

“CarMax, headquartered in Richmond, VA, is the largest and most profitable used car retailer in the U.S., selling a combined 1.596 million used vehicles annually through retail and wholesale channels across its 226 stores and omni-channel platform. The company has just 4% of a huge $750 billion market. It operates across two segments, CarMax Sales Operation and CarMax Auto Finance (CAF), together covering all aspects of auto merchandising, service, and financing. By segment, the profit is also split into CarMax Sales Operations (80%) and CAF (20%).⁵ CarMax Sales Operation has three primary sources of revenue: Used (78% of sales and 63% of segment gross profit), Wholesale (19% of sales and 21% of segment gross profit), and Other (3% of sales and 16% of segment gross profit).

Good Business

The CarMax brand stands for providing a large selection of high-quality used vehicles at fair prices, and it has earned the trust of customers since beginning operations nearly 30 years ago.

The company has demonstrated consistent growth and leading profitability in one of the largest retail markets in the world ($750 billion). Sales and earnings per share (EPS) have grown at +8% and +11% annually over the last decade, with return on equity averaging approximately 20%…” (Click here to see the full text)