Was Billionaire Jorge Paulo Lemann’s 3G Capital Right About These 5 Stocks?

3. Carvana Co. (NYSE:CVNA)

3G Capital’s Stake Value: $88,954,000

Performance of the stock over the past 12 months as of November 22: -97%

Carvana Co. (NYSE:CVNA), an online used car retailer, accounts for 19.34% of Lemann’s Q3 investments, with his investment firm holding an $88.9 million position in the company. Zachary Sternberg and Benjamin Stein’s Spruce House Investment Management is one of the leading stakeholders of Carvana Co. (NYSE:CVNA), with 3.75 million shares worth $1.13 billion. 

Here is what Steel City Capital has to say about Carvana Co. (NYSE:CVNA) in their Q1 2021 investor letter:

“Carvana’s (CVNA) 4Q’20 results weren’t particularly great. EBITDA was negative ($70) million, a stark turnaround on a sequential basis from a first-ever EBITDA profit of $21 million in 3Q’20. The culprit was a steep drop off in retail unit GPU ($1,265 vs. $1,857) and wholesale unit GPU ($358 vs. $1,113) as some of the COVID-driven aberrations in the used car market began to abate.

The company’s presentation of EBITDA (calculated “bottom up”) is dubious, as it commingles non-operating items including mark-to-market changes in its retained securitization portfolio. With the exception of 1Q’20, when ABS markets were going haywire, this line item provided a tailwind throughout 2020, including a gain of $5 million in 4Q’20. Also on the non-operating self-help front, management released a reserve for vehicle service contract cancellations in 4Q’20, adding another $7 million to EBITDA, and boosting “Other” GPU by $96…” (Click here to see the full text)