Do You Expect Long-term Gains from CarMax (KMX)?

Weitz Investment Management, an investment management firm, released its “Partners III Opportunity Fund” fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund’s Institutional Class returned +5.45% compared to a +7.18% return for the Russell 3000 Index. For the full year, the fund returned -22.46% compared to -19.21% for the benchmark. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.

Weitz Partners III Opportunity Fund highlighted stocks like CarMax, Inc. (NYSE:KMX) in its Q4 2022 investor letter. Headquartered in Richmond, Virginia, CarMax, Inc. (NYSE:KMX) is a used vehicle retailer. On March 9, 2023, CarMax, Inc. (NYSE:KMX) stock closed at $66.37 per share. One-month return of CarMax, Inc. (NYSE:KMX) was -9.79%, and its shares lost 33.10% of their value over the last 52 weeks. CarMax, Inc. (NYSE:KMX) has a market capitalization of $10.488 billion.

Weitz Partners III Opportunity Fund made the following comment about CarMax, Inc. (NYSE:KMX) in its Q4 2022 investor letter:

“Unfortunately, the performance story of the year is told by the Fund’s detractors. Higher financing costs and volatile vehicle prices have wreaked havoc on all used car sellers, but CarMax, Inc. (NYSE:KMX) shares have been doubly hit as management continues to invest in capabilities that improve the used car buying experience both online and “on the lot.”

Meta, Alphabet, Amazon and CarMax were all top detractors for the quarter and calendar year periods (FIS and Liberty Broadband, respectively, complete the quarterly and calendar-year detractor lists.) To varying degrees, each is managing through cyclical challenges during a period of substantial investor pessimism. Drawdowns of this magnitude are painful, and it may be prudent for management to moderate the pace of some investments, but we remain encouraged by their long-term focus. In the short run, cutting spending indiscriminately to “defend earnings” may lessen the pain of a drawdown, but it seldom grows a company’s business value — the ultimate prize. We added to both CarMax and Meta on weakness, and all four remain core holdings.”

Image: Courtesy of Carmax

CarMax, Inc. (NYSE:KMX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held CarMax, Inc. (NYSE:KMX) at the end of the fourth quarter which was 25 in the previous quarter.

We discussed CarMax, Inc. (NYSE:KMX) in another article and shared Diamond Hill Large Cap Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 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.