Top 5 Stock Picks of Thomas Bancroft’s Makaira Partners

3. CarMax, Inc. (NYSE:KMX)

Makaira Partners’ Stake Value: $55.967 million

Percentage of Makaira Partners’ 13F Portfolio: 11.82%

Number of Hedge Fund Holders: 36

CarMax, Inc. (NYSE:KMX) is a Virginia-based used vehicle retailer and also provides auto finance operations. The company started a new car operation in 1996 but sold its last new car franchise in 2021. CarMax, Inc. (NYSE:KMX) has 225 locations across the United States with 27,000 full-time employees.

Compared to the previous year CarMax, Inc.’s (NYSE:KMX) revenue increased by 65% year-over-year in 2021 and sales rose up to 77% in the last two years.

On December 23, CarMax, Inc.’s (NYSE:KMX) price target was raised from $156 to $157 by RBC Capital analyst Steven Shemesh. The analyst kept an Outperform rating on the company’s shares and noted that the company had “impressive” third-quarter results and beat expectations across all metrics”

CarMax, Inc. (NYSE:KMX) was mentioned by Giverny Capital in their second-quarter 2021 investor letter. Here are the contents of the letter:

“We’re quite optimistic about Carmax, our second largest position. For several years, investors have gravitated to a thesis that a handful of start-ups that sell used cars in an online-only format will end up with a lower cost structure than Carmax. This even though Carmax appears today to have lower costs to buy used cars for its inventory, recondition them for resale and transport them to stores – all problems that are not solved by a good web site. Carmax also amortizes its national advertising over a much larger sales base than competitors, giving it lower marketing expense per vehicle.

Nevertheless, Carmax was slow to respond to the emerging market for online car shopping. The good news is that it ultimately responded with vigor. Over the past few years it has seen operating margins contract as it invested in an omnichannel capability that lets customers buy fully online or do a portion of the transaction online and a portion in the store. Importantly, the customer chooses exactly which parts of the transaction to complete online or in store…” (Click here to see the full text)