Investment management company Vulcan Value Partners recently released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. All the strategies of Vulcan Value Partners delivered positive results in the year. The Large Cap Composite (Net) returned -1.5% in Q4 and 7.9% YTD, the Small Cap Composite (Net) gained 3.2% in Q4 and 9.5% YTD, The Focus Composite (Net) retuned 0.1% in Q4 and 7.1% YTD, Focus Plus Composite (Net) returned 0.1% in Q4 and 6.2% YTD and the All-Cap Composite (Net) returned 1.3% in Q4 and 10.7% YTD. Despite overvalued markets, the firm improved its price-to-value ratios while still achieving positive returns, prioritizing safety and long-term gains over short-term performance. This situation echoes the late 1990s dot-com bubble, where hype and high valuations led to a crash, and today’s AI disruptions seem to mirror that pattern, with investors risking overpaying for promising businesses. The firm is addressing such situations by sticking to its investment discipline. For more information on the firm’s best picks in 2025, please check its top five holdings. In addition, please check the firm’s top five holdings to know its best picks in 2025.
In its fourth-quarter 2025 investor letter, Vulcan Value Partners highlighted stocks like CarMax, Inc. (NYSE:KMX). Vulcan Value Partners added CarMax, Inc. (NYSE:KMX) to its All-Cap Strategy during the quarter. CarMax, Inc. (NYSE:KMX) is a used vehicle retailer headquartered in Richmond, Virginia. The one-month return of CarMax, Inc. (NYSE:KMX) was 21.80%, and its shares lost 42.19% of their value over the last 52 weeks. On January 22, 2026, CarMax, Inc. (NYSE:KMX) stock closed at $47.83 per share, with a market capitalization of $5.826 billion.
Vulcan Value Partners stated the following regarding CarMax, Inc. (NYSE:KMX) in its fourth quarter 2025 investor letter:
“CarMax, Inc. (NYSE:KMX) is the largest used car retailer in the U.S. and has the third largest vehicle wholesale business in the U.S. alongside a large captive finance business. CarMax has underperformed both our and their own expectations over the past two quarters. We believe that the factors causing the weak results are part-macro, part-competitive, and part-operational. The used car industry is still feeling the effects of COVID. Very depressed used car supply, low but improving new car inventories, higher new and used car prices and higher rates have combined to create a perfect storm that has been a headwind to CarMax and industry-wide volumes. These largely cyclical macro factors along with the resurgence of Carvana have led to a more competitive used car market. Although the market is competitive, we believe that CarMax’s customer experience, brand, scale, vertical integration, and omnichannel approach are competitive advantages. These advantages should enable them to remain a leader and to take market share in a highly fragmented market over time. As a reminder approximately 95% of the used car market is made up of players not named CarMax or Carvana. We believe that CarMax can compete and win against the franchise dealers and the smaller independent dealers as they typically have. We also believe that CarMax has all the assets to compete effectively with Carvana. We are encouraged by the operational changes the company is making to increase volumes, lower costs, and expand profitability. We anticipate that these changes, along with a normalizing used car market, will lead to a recovery in earnings. Although results may remain bumpy in the short-term, we believe CarMax is a very good business, with favorable long-term prospects. The company has a deep bench of talent, a solid balance sheet, produces significant free cash flow, and is currently buying back shares at a significant discount to our estimate of intrinsic value.”
CarMax, Inc. (NYSE:KMX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 54 hedge fund portfolios held CarMax, Inc. (NYSE:KMX) at the end of the third quarter, the same as in the previous quarter. CarMax, Inc. (NYSE:KMX) reported total sales of $5.8 billion in the third quarter of fiscal 2026, a 6.9% decline from last year due to lower volume. While we acknowledge the risk and potential of CarMax, Inc. (NYSE:KMX) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CarMax, Inc. (NYSE:KMX) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered CarMax, Inc. (NYSE:KMX) and shared FPA Source Capital’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.
READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.
Disclosure: None. This article is originally published at Insider Monkey.
