10 Best Car Repair Stocks to Buy Now

7. CarMax, Inc. (NYSE:KMX)

Number of Hedge Fund Holders: 35

CarMax, Inc. (NYSE:KMX) retails used vehicles and offers reconditioning and vehicle repair services to its customers. It is based in Richmond, Virginia.

While the automotive industry, in general, has been facing significant headwinds in light of higher inflation, CarMax, Inc. (NYSE:KMX) has managed to stay strong and continues to be a large, well-known, and profitable business. In the fiscal first quarter of 2025, the company benefited from positive trends in pricing and vehicle value stability. It also expanded its vehicle sourcing capabilities by attracting more dealers to its MaxOffer program through product enhancements that make the program easier to use.

Another factor that sets CarMax, Inc. (NYSE:KMX) apart from its competitors in the market is that its financial and operational performance remained largely unaffected by the CDK outage since it doesn’t use CDK as its Dealership Management System. Resultantly, the company managed to avoid much of the negative impact of the outage and came out on top relative to its competitors that did use the CDK system. CarMax, Inc.’s (NYSE:KMX) improved competitive advantage and omnichannel approach have thus aided in the company’s growth and popularity among investors.

In total, 35 hedge funds were long CarMax, Inc. (NYSE:KMX) in the second quarter, with a total stake value of $1.1 billion.

 Vulcan Value Partners mentioned CarMax, Inc. (NYSE:KMX) in its second-quarter 2024 investor letter:

CarMax, Inc. (NYSE:KMX) is the largest used car retailer in the United States. The company has the third largest wholesale business in the U.S. and a large captive finance business. We believe that CarMax’s omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell and finance vehicles. Over the last two years, management has focused on de-leveraging the company’s balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company’s prospects.