Is CarMax (KMX) a Smart Long-term Buy?

On October 12, 2020, Giverny Capital released its Q3 2020 Investor Letter, a copy of which you can download here. The Fund returned 6.50% for the third quarter of 2020. Meanwhile, the benchmark S&P 500 Index gained 8.93%. You should check out Giverny Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Giverny Capital highlighted a few stocks and Carmax Inc (NYSE:KMX) is one of them. Carmax Inc (NYSE:KMX) is a used-car retailer. Year-to-date, Carmax Inc (NYSE:KMX) stock gained 3.7% and on October 23rd it had a closing price of $90.95. Here is what Giverny Capital said:

“We’d note our largest holding Carmax continues to generate admirable performance that is heavily discounted by the market, which believes Internet-based competitors like Carvana and Vroom have superior business models for selling used cars. For its quarter ended August 31, Carmax reported 28% growth in earnings per share and solid unit growth, yet the stock declined after that announcement on concerns that its brick and mortar car lots may soon be obsolete. We’re confident in Carmax’s consumer proposition and in the viability of its omnichannel approach to selling cars, whereby it can serve customers in stores or online.”

In Q2 2020, the number of bullish hedge fund positions on Carmax Inc (NYSE:KMX) stock increased by about 24% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in Carmax’s growth potential. Our calculations showed that Carmax Inc (NYSE:KMX) 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 scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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.