In this article, we will explore the 10 best used car stocks to buy according to hedge funds.
Used Car Prices Decline: What Buyers Need to Know
The used car market plays a vital role in the automotive industry by providing affordable vehicle options. The market also supports economic growth by creating jobs in sales, financing, and maintenance while promoting sustainability through the reuse of vehicles. According to IMARC Group, the United States used car market size reached 36.1 million units in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 3.5% during 2024-2032 to reach 50.36 million units by the end of the forecasted period.
The used car market is experiencing notable changes as prices have continued to decline, creating a more favorable environment for buyers. In Q2 2024, the average price of used vehicles fell by 6.8% year-over-year, dropping from $29,382 to $27,319, according to data from Edmunds.
Despite this decline in used car values, the average time it takes to sell a used vehicle remains almost unchanged at around 35 days, indicating that while prices are lower, demand is still consistent. On the other hand, the average days to turn for new vehicles rose to 53 days in Q2 2024, up from 37 days in Q2 2023. This trend reflects broader dynamics in the automotive market, particularly as new car inventory levels rise.
This buildup of new cars has prompted dealers to offer discounts and incentives on older inventory, which in turn affects the values of newer used vehicles. As prices for used cars trend downward, consumers are presented with more affordable options, making it an advantageous time for buyers in the used car market.
Fed’s Rate Cut and the Car Market
The Federal Reserve recently cut U.S. short-term borrowing costs by half a percentage point, marking its first rate reduction in four years. The new key rate now stands at 4.75%-5.00%. This significant move aims to alleviate financial pressures on consumers amid concerns about a cooling labor market and high inflation, which the Fed has been combating for over two years.
The recent rate cut could eventually boost new vehicle sales. However, on September 30, CNBC reported that experts caution the effects on auto loan rates may not be immediate or substantial. Currently, auto loan rates remain high, with averages exceeding 9.61% for new cars and nearly 14% for used vehicles, according to Cox Automotive. Jonathan Smoke, chief economist at Cox Automotive, notes that although conditions are expected to improve compared to the previous year, affordability challenges will persist. He highlights that interest rates will still be more than two and a half percentage points higher than the average levels seen over the past 24 years.
While a half-percentage-point reduction is a positive step, analysts indicate that consumers might not see substantial changes in borrowing costs so soon. Smoke pointed out that auto loan rates are influenced by longer-term bond yields and the performance of loans. As a result, auto loan rate changes can be delayed.
With a clearer understanding of the dynamics in the US car market, let’s now turn our attention to the 10 best used car stocks to buy according to hedge funds.
An auto warehouse filled with newly acquired used cars.
Methodology
To compile our list of the 10 best used car stocks to buy according to hedge funds, we used the Finviz and Yahoo stock screeners to find the largest used car companies. We also reviewed various online resources for additional insights. From this initial pool of more than 20 used car stocks, we focused on the top 10 stocks most favored by institutional investors. The stocks are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Used Car Stocks To Buy According to Hedge Funds
10. ACV Auctions Inc. (NASDAQ:ACVA)
Number of Hedge Fund Investors: 24
ACV Auctions Inc. (NASDAQ:ACVA) is a leading online platform that leverages data and technology to facilitate the buying, selling, and valuing of used cars and other vehicles. The company offers a digital marketplace that includes core auction services and additional features like ACV Transportation and ACV Capital. ACV provides detailed insights into vehicle conditions and values, helping dealers make informed decisions. With a mission to transform the automotive industry, the company aims to create a trusted and efficient marketplace for used vehicles, offering tools such as vehicle inspections and marketplace enablement to enhance transparency and efficiency in transactions.
In Q2 2024, ACV reported impressive financial performance, selling 187,000 vehicles, which marks a 22% increase compared to the same period in 2023. The company achieved revenue of $161 million, reflecting a significant 29% year-over-year growth, driven by strong listing growth and high conversion rates. Additionally, the average revenue per unit (ARPU) increased by 9%, demonstrating the value ACV Auctions Inc. (NASDAQ:ACVA) is delivering to the market.
Marketplace and service revenue reached $144 million, up 32% compared to Q2 2023. This growth indicates ACV’s successful strategy in expanding its digital marketplace offerings and enhancing dealer services.
ACV Auctions Inc. (NASDAQ:ACVA) is investing in improving its service offerings through various innovative initiatives while also enhancing the dealer experience and expanding its market reach. The company is piloting a new financing option that allows dealers to source consumer vehicles and trade-ins, which can then be sold on its wholesale marketplace. This new offering, combined with the existing ClearCar vehicle inspection system, supports dealers in optimizing their vehicle sourcing strategies. Additionally, ACV is investing in technology to boost marketplace conversion rates, including features like advanced search and AI-enabled pricing data. These innovations are designed to provide dealers with accurate pricing and streamline the appraisal process, ultimately driving growth and improving operational efficiency.
The company’s commitment to expanding its suite of services and solutions positions it well for future growth, suggesting potential for significant returns for investors looking to capitalize on the evolving automotive market.
ACVA is one of the best used car stocks to buy according to hedge funds. According to Insider Monkey’s Q2 database of over 900 hedge funds, 24 hedge funds held stakes in ACV Auctions Inc. (NASDAQ:ACVA). As of June 30, Atreides Management holds 7.83 million shares of the company, valued at $142.94 million, making it ACVA’s most prominent shareholder.
Meridian Funds stated the following regarding ACV Auctions Inc. (NASDAQ:ACVA) in its first quarter 2024 investor letter:
“ACV Auctions, Inc. operates a digital wholesale auction marketplace to facilitate business-to-business used car sales between sellers and dealers. It has disrupted the traditional physical used-car auction marketplace by attracting thousands of dealers to its online platform. ACV’s competitive advantage is its sizeable team of inspectors and the technology tools supporting this team. The depth and accuracy of ACV’s inspection reports provide buyers the confidence to bid aggressively, knowing that they are unlikely to contend with negative post-purchase surprises. Sellers are drawn to ACV due to its lower auction fees and large buyer base. The stock appreciated during the quarter on strong results and 2024 guidance that came in well ahead of expectations. After a challenging 2-year period characterized by low dealer inventories and high car prices, new and used car markets are showing signs of normalization. We expect ACV to continue growing market share and to generate higher margins as volumes return closer to normal (volumes remain approximately 40% below pre-pandemic levels). The company is also well positioned as the market continues to migrate from legacy physical auctions toward ACV’s more efficient digital platform. As fundamentals continued to improve during the quarter, we maintained a large position in the company.”
Analysts are also bullish on ACVA and have a consensus buy rating on the stock. The 12-month median price target of $23.00 set by analysts indicates a potential upside of 17% from current levels.
9. Penske Automotive Group Inc. (NYSE:PAG)
Number of Hedge Fund Investors: 28
Penske Automotive Group Inc. (NYSE:PAG) is a leading international transportation services company and one of the largest automotive and commercial truck retailers globally. The company operates dealerships in the United States, Canada, the United Kingdom, Germany, and Italy. In addition to new and used vehicle sales, Penske distributes commercial vehicles, diesel and gas engines, and power systems primarily in Australia and New Zealand. Furthermore, the company holds a 28.9% stake in Penske Transportation Solutions, which manages a fleet of over 431,000 trucks and trailers, providing innovative transportation solutions across North America.
The company’s diverse operations across multiple countries and its strong market presence in commercial vehicles enhance its overall stability and profitability.
Penske Automotive Group Inc. (NYSE:PAG) reported strong financial performance in Q2 2024, achieving record quarterly revenue of $7.7 billion, a 3% increase year-over-year. The company’s diversification strategy has paid off, with significant growth in retail automotive and commercial truck businesses. During the quarter, Penske delivered a total of 126,653 new and used units. Notably, service and parts revenue reached a record $753 million, up 10% year-over-year. Additionally, the gross profit per new vehicle retailed improved by $73, reflecting operational efficiency.
On July 16, 2024, Penske Automotive Group Inc. (NYSE:PAG) announced the acquisition of Bill Brown Ford in Livonia, Michigan, which is recognized as one of the world’s largest Ford dealerships by sales volume. This strategic acquisition is expected to add approximately $550 million in annualized revenue and enhance Penske’s presence in Michigan’s largest county by population. The deal includes over 200,000 square feet of facilities, including a main dealership and a collision center, allowing the company to leverage Bill Brown Ford’s established reputation and community relationships.
Earlier, on June 4, 2024, Penske completed its acquisition of Porsche Centre Brighton and Porsche Centre Doncaster in Melbourne, Australia, expanding its portfolio to a total of 24 Porsche dealerships worldwide. This acquisition is projected to contribute an additional $130 million in annualized revenue. Together, these acquisitions reflect Penske Automotive Group Inc.’s (NYSE:PAG) commitment to growth through strategic investments and its focus on enhancing its automotive retail footprint across key markets.
According to Insider Monkey’s database, 28 hedge funds held stakes in Penske Automotive Group Inc. (NYSE:PAG) during the second quarter of 2024, with a total investment value of $251.81 million. GAMCO Investors is the largest shareholder, owning a position worth $63.32 million as of June 30.
8. Asbury Automotive Group Inc. (NYSE:ABG)
Number of Hedge Fund Investors: 30
Asbury Automotive Group Inc. (NYSE:ABG) is one of the largest automotive retailers in the United States, operating 153 new vehicle dealerships and 37 collision repair centers across various states. The company offers a wide range of services, including the sale of new and used vehicles, vehicle repair and maintenance, and finance and insurance products. Asbury is committed to enhancing the customer experience through innovative technologies like its online car-buying platform, Clicklane.
The company’s diverse revenue base, along with its commitment to operational excellence across its dealership portfolio, delivers a resilient business model.
During the CDK outage, which impacted several automotive companies, Asbury Automotive Group Inc. (NYSE:ABG) effectively utilized its omni-channel platform, ClickLane, to continue selling vehicles. The company facilitated over 15,200 sales through Clicklane in the second quarter of 2024, an all-time record. This innovative approach allowed the company to mitigate the impact of the outage on its financial performance. As a result, Asbury delivered a record second-quarter total revenue of $4.2 billion, an increase of 13% year-over-year, and record second-quarter parts and service revenue with $581 million and gross profit of $340 million.
Asbury Automotive Group Inc. (NYSE:ABG) has managed to grow its top line at a compound annual growth rate (CAGR) of 10.97% over the past ten years. The company is focused on improving its profit margins, especially within its service business, which showed positive results in the second quarter with increased revenue from services. The company is also building investor confidence through smart capital allocation strategies that balance acquisitions, organic growth, and share buybacks. In the second quarter, Asbury repurchased $43 million in shares. By pursuing these strategies, the company aims to expand its market share, enhance its overall value, and deliver returns to its shareholders.
In the second quarter of 2024, 30 hedge funds held stakes in Asbury Automotive Group Inc. (NYSE:ABG), with a total investment value of $1.37 billion. Abrams Capital Management emerged as the largest shareholder, owning 2.1 million shares of the company. ABG ranks 8th on our list of the best used car stocks to buy according to hedge funds.
7. CarGurus Inc. (NASDAQ:CARG)
Number of Hedge Fund Investors: 32
CarGurus Inc. (NASDAQ:CARG) is a multinational, online automotive platform that facilitates the buying and selling of vehicles. The company offers a comprehensive marketplace that empowers consumers to confidently purchase or sell cars either online or in person. The company provides dealerships with tools to accurately price, market, and quickly sell vehicles, leveraging proprietary technology and data analytics to ensure transparency and competitive pricing. It is one of the most visited automotive shopping sites in the US. The company also operates online marketplaces in Canada and the United Kingdom.
The company is focused on driving future growth by enhancing its platform and services for dealers and consumers. In the second quarter of 2024, the company achieved a 15% year-over-year increase in listings revenue, thanks to strong lead growth and improved traffic conversion rates. CarGurus Inc. (NASDAQ:CARG) has introduced innovative tools like the Next Best Deal Rating, which helps dealers optimize their pricing strategies, resulting in increased vehicle visibility and faster sales. This tool has gained significant traction, with over 9,200 dealers adopting the tool within just 3 quarters of its launch. The company’s newest product Maximize Margin uses data to inform dealers how much they can increase the price of a vehicle without risking their deal ratings.
In the Q2 2024 earnings call, management highlighted that approximately 50% of dealers who have used CarGurus’ services for over a year have increased their spending through add-on products, upgrades, and contract renewals. Notably, 36% of all contracts signed during the quarter were for six months or longer, indicating a strong commitment from dealers. These trends reflect CarGurus Inc.’s (NASDAQ:CARG) growing value to its dealer partners and its ability to enhance customer engagement and satisfaction.
At the same time, the company is actively investing in enhancing its consumer app, which contributed to 28% of its leads. The company has simplified the vehicle search process and personalized the experience for returning users, resulting in a 16% increase in one-month app retention rates. In addition to app improvements, CarGurus Inc. (NASDAQ:CARG) is advancing its AI initiatives to streamline the shopping journey, offering features like conversational search and vehicle recommendations. These efforts have solidified CarGurus’ position as the most visited automotive marketplace, with 56% more visits than its closest competitor.
In Q2 2024, CarGurus Inc. (NASDAQ:CARG) reported consolidated revenue of $219 million, a 9% decline year-over-year, primarily due to lower wholesale and product volumes. However, the company’s marketplace business thrived, achieving $195 million in revenue, which is a 14% increase year-over-year. This growth was driven by a rise in subscription-based listings and the adoption of add-on products, reflecting the company’s strong value proposition for dealers. The company was also able to expand its dealer base by 255 year-over-year, reaching the highest number of paying dealers since early 2020.
The company’s international business remains a key focus area, with revenue increasing by 21% year-over-year in the second quarter, primarily due to the growth of the dealer base.
According to Insider Monkey’s Q2 2024 database, 32 hedge funds held stakes in CarGurus Inc. (NASDAQ:CARG), an increase from 25 hedge funds in Q1 2024. This growth in hedge fund interest reflects a rising confidence in the company’s potential and performance.
With a focus on product innovation and enhancing the consumer experience through AI and app improvements, CarGurus Inc. (NASDAQ:CARG) is well-positioned to capture a larger market share in the automotive sector.
6. Lithia Motors Inc. (NYSE:LAD)
Number of Hedge Fund Investors: 35
Lithia Motors Inc. (NYSE:LAD) is a leading automotive dealership group in the US. It operates 299 locations across the US, 15 locations in Canada, and 155 locations in the UK. The company offers a wide range of products and services throughout the vehicle ownership lifecycle, including new and used vehicle sales, financing solutions, and efficient auto repair services. The company provides simple, transparent, and convenient experiences through both physical dealerships and e-commerce platforms.
Despite challenges from the CDK outage, the company has shown strong performance in Q2 2024, with revenues reaching $9.2 billion, a 14% increase year-over-year. Lithia Motors Inc. (NYSE:LAD) also reported profitability in its financing operations, which turned around from a loss of $18.7 million in Q2 2023 to an income of $7.2 million in Q2 2024.
Lithia Motors Inc. (NYSE:LAD) continues to strengthen its business through strategic acquisitions, which have become a core competency for the company. During the second quarter, Lithia welcomed two stores from the Sunrise Group in Tennessee and a Woodbridge Hyundai store in Toronto. On September 10, Lithia Motors Inc. (NYSE:LAD) announced the acquisition of three dealerships from Duval Motor Company in Florida, projected to generate over $200 million in annual revenue.
The company has managed to grow its top line at a compound annual growth rate (CAGR) of 22.61% over the past ten years, while its bottom line has increased at a CAGR of 21.50% during the same period.
This combination of revenue growth, strategic expansion, and a resilient business model makes Lithia Motors Inc. (NYSE:LAD) an attractive stock. Additionally, LAD can be considered cheap at current levels. The stock is trading at only 11 times its forward earnings, a 35% discount to its sector median.
According to Insider Monkey’s database, 35 hedge funds held stakes in Lithia Motors Inc. (NYSE:LAD) in the second quarter of 2024. This brings LAD to the 6th spot on our list of the best used car stocks to buy according to hedge funds.
5. CarMax Inc. (NYSE:KMX)
Number of Hedge Fund Investors: 35
CarMax Inc. (NYSE:KMX) is a leading retailer of used vehicles in the US with more than 245 locations across the country. It also provides automobile financing services. The company primarily generates revenue from its retail, wholesale, and auto financing businesses. CarMax offers a unique omni-channel experience, allowing customers to shop online or in-store. In the fiscal year that ended February 29, 2024, CarMax sold approximately 770,000 used vehicles and 550,000 wholesale vehicles at its auctions. During the same period, CarMax Auto Finance originated over $8 billion in auto financing, contributing to its substantial portfolio of more than $17 billion.
In its Q2 2025, the company demonstrated strong performance by purchasing around 300,000 vehicles, marking a 3% increase year-over-year. CarMax purchased around 269,000 vehicles from consumers with over half of these purchases coming through its online instant appraisal service. Approximately 57% of retail unit sales during the quarter were classified as omni-sales. Around 15% of retail unit sales were completed online, up from 14% last year, demonstrating CarMax’s effective integration of digital and in-store shopping options.
For fiscal Q2 2025, the company reported a revenue of $7.01 billion, surpassing analysts’ expectations by $187.41 million. The company achieved a net earnings per diluted share of $0.85, a 13% increase year-over-year, despite an increase in loan loss provisions.
CarMax Inc. (NYSE:KMX) is focused on improving efficiency in order to promote future growth. The company successfully rolled out a new order processing system nationwide across its stores and customer experience centers. This system helps associates guide customers through their buying journey. The company is focused on further improving efficiency and customer satisfaction through innovative tools like shopping accounts and a generative AI knowledge management system for associates. These tools are planned to be rolled out later this year. Additionally, the launch of an EV Hub on their website positions CarMax Inc. (NYSE:KMX) to meet the growing interest in electric vehicles and hybrids.
With its commitment to a seamless omni-channel experience and ongoing enhancements to operations, KMX stands out as an attractive option for investors seeking opportunities in the expanding used car market. It ranks among the top 5 on our list of the best used car stocks to buy according to hedge funds.
Insider Monkey’s Q2 2024 database reveals that 35 hedge funds held investments in CarMax Inc. (NYSE:KMX), amounting to over $1.1 billion in total stakes. Diamond Hill Capital is the most significant shareholder, possessing 6.7 million shares valued at nearly $491.6 million as of June 30.
4. Group 1 Automotive Inc. (NYSE:GPI)
Number of Hedge Fund Investors: 37
Group 1 Automotive Inc. (NYSE:GPI) is a leading automotive retailer that operates 260 dealerships and 338 franchises across the United States and the United Kingdom, offering a wide range of new and used vehicles from a wide variety of brands. The company generates revenue through various channels, including vehicle sales, financing arrangements, service contracts, and automotive maintenance and repair services. The company leverages its extensive dealership network and omni-channel platform to meet customer demands effectively.
The company faced significant challenges in the second quarter of 2024 due to the CDK outage that impacted its US operations from June 19 to June 26. Despite this disruption, Group 1 Automotive Inc. (NYSE:GPI) demonstrated resilience by continuing to serve customers through alternative processes.
In the second quarter of 2024, Group 1 Automotive Inc. (NYSE:GPI) reported impressive financial results, achieving an adjusted net income of $133.1 million and total revenues of $4.7 billion, marking a second-quarter record. The company experienced all-time high new vehicle revenues of $2 billion in the US, driven by a 7% increase in new vehicle sales units. Used vehicle sales also saw growth both sequentially and year-over-year, demonstrating strong demand despite slight declines in gross profit per unit.
Additionally, the company has recently expanded its UK operations with two significant acquisitions. On October 1, 2024, the company announced the purchase of Soper of Lincoln BMW/MINI, located north of London in the county of Lincolnshire. This investment is expected to generate around $125 million in annual revenues. Earlier, on July 1, 2024, Group 1 Automotive Inc. (NYSE:GPI) acquired four Mercedes-Benz dealerships in Hertfordshire, projected to bring in $105 million in annual revenues.
In the Q2 2024 earnings call, management announced that the company is looking forward to closing the Inchcape acquisition, which is expected to add $2.7 billion in revenue and effectively double its size in the UK. These strategic acquisitions enable the company to strengthen its brand portfolio and customer reach, positioning it well for continued growth and profitability.
As of the second quarter of 2024, Group 1 Automotive Inc. (NYSE:GPI) was held by 37 hedge funds, with total stakes amounting to $451.38 million, according to Insider Monkey’s database.
3. AutoNation Inc. (NYSE:AN)
Number of Hedge Fund Investors: 38
AutoNation Inc. (NYSE:AN) is one of the largest automotive retailers in the US. It is known for its extensive network of over 300 dealerships that offer a wide selection of new and used vehicles. The company generates revenue primarily through vehicle sales, with a significant portion coming from its used car segment. AutoNation also provides financing options, parts, and expert maintenance and repair services to enhance the overall customer experience.
In its second quarter of 2024, the company demonstrated strong resilience despite challenges from the CDK outage that affected operations. New vehicle sales were down by 2%, but the company saw a 6% unit growth for its import brands. While used vehicle sales decreased by 8% for the quarter year-over-year, demand remained strong, indicating a healthy market. Effective sourcing and pricing strategies in the used car segment remain a key focus area for the company.
During the system outage, AutoNation Inc. (NYSE:AN) manually processed nearly 60,000 repair orders. This highlights the company’s commitment to customer satisfaction and operational resilience, even in tough situations.
The company also showcased solid financial management, with significant cash generation allowing for strategic capital deployment, including the repurchase of over 5% of its shares since the beginning of this year. The company’s commitment to delivering value to shareholders, combined with its operational strength and strategic focus, makes AutoNation Inc. (NYSE:AN) an attractive stock for investors. AN can be considered cheap at current levels. It is trading at only 10.08 times its forward earnings, a 41% discount to its sector.
In the second quarter, AutoNation Inc. (NYSE:AN) was held by 38 hedge funds, with total stakes amounting to $616.27 million, according to Insider Monkey’s database. Brave Warrior Capital emerged as the largest shareholder, holding a position worth $156.07 million as of June 30. AN ranks among the top 3 on our list of the best used car stocks to buy according to hedge funds.
Alluvium Asset Management stated the following regarding AutoNation Inc. (NYSE:AN) in its second quarter 2024 investor letter:
“Autonation (down 3.7%) operates around 350 dealer franchises across the US, as well as collision centres and used vehicle stores. When compared to Group 1, it sells more units at a slightly higher price and margin, and derives around 50% more revenue. But its strategy is different, with nationwide branding and centralised operations. Although we prefer the Group 1 model, the economics of Autonation look attractive to us. And by introducing this into the portfolio we could thereby invest more than 5% of assets in this sector without necessitating the sale of other attractive large positions. And so after selling a little Group 1 and buying Autonation we ended the quarter with 4.1% and 1.9% positions respectively.”
2. Copart Inc. (NASDAQ:CPRT)
Number of Hedge Fund Investors: 50
Copart Inc. (NASDAQ:CPRT), specializing in online vehicle auctions, is one of the best used car stocks to buy according to hedge funds. Founded in 1982, the company has grown from a single salvage yard in California to a global operation with over 200 locations across 11 countries. Copart’s online auction platform offers a wide range of vehicles, catering to various buyers, including used car enthusiasts, dismantlers, dealers, body shops, and salvage buyers. With nearly 200,000 vehicles available daily, the inventory includes used, wholesale, and salvage title cars sourced from insurance companies, finance companies, fleet operators, rental firms, dealers, and charities. Through Copart Direct, the company provides a quick and easy way for individuals to sell their used, damaged, or unwanted vehicles.
The company’s success stems from its unique blend of digital and physical assets. Copart’s advanced online auction technology allows users to bid on vehicles from the comfort of their homes, while its extensive inventory spread, spanning over 8,000 acres, supports efficient vehicle management. This combination allows Copart Inc. (NASDAQ:CPRT) to efficiently manage the entire process from vehicle acquisition to sale, serving a diverse customer base and selling over two million vehicles annually.
CPRT recently reported results for the fourth quarter of fiscal ’24. Earnings per share (EPS) of $0.33 fell short of the expected $0.36. Despite this earnings miss, Copart Inc. (NASDAQ:CPRT) reported strong performance in its fourth quarter and fiscal year 2024, with global unit sales increasing by 8% compared to the fourth quarter of 2023. Revenue for the quarter reached nearly $1.1 billion, a growth of about 7%. For the fiscal year 2024, global revenue increased by 10% year-over-year to reach above $4.2 billion, representing growth of over $367 million.
In Q4 2024, the company’s US business saw unit growth of over 6% year-over-year, driven by significant increases in both fee and purchase units. Copart’s (NASDAQ:CPRT) international business experienced even more impressive growth, with unit sales rising nearly 17% in the fourth quarter and 21% for fiscal year 2024, compared to the same periods last year.
Notably, non-insurance unit volume growth has continued to outpace unit volume growth from insurance clients, with fleet rental and finance units growing over 20% in the fourth quarter and 28% for the year, compared to the same periods last year. Unit volume growth from car dealers and dealerships also increased nearly 10% for the quarter and over 15% in the fiscal year 2024. This diverse revenue stream highlights Copart Inc.’s (NASDAQ:CPRT) ability to adapt and thrive in a competitive market.
Additionally, Copart Inc. (NASDAQ:CPRT) generated an impressive free cash flow of $962 million for the year, reflecting its operational efficiency and strong financial health. The company continues to invest in expanding its infrastructure. During the Q4 2024 earnings call, management reported that the company has acquired over 1,100 acres of land and 370 transportation assets as well as enhanced physical infrastructure.
Over the past ten years, Copart Inc. (NASDAQ:CPRT) has managed to grow its revenue at a compound annual growth rate (CAGR) of 13.80%, while its net income has increased at a CAGR of 22.53% during the same period.
With a solid track record of growth, Copart Inc. (NASDAQ:CPRT) represents a compelling investment opportunity. It has gained significant interest from institutional investors, with the number of hedge fund holders increasing to 50 in Q2 2024, up from 41 in the previous quarter. This reflects growing confidence among investors in CPRT’s long-term potential and its ability to deliver consistent growth.
1. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Investors: 61
Carvana Co. (NYSE:CVNA) is a compelling investment opportunity in the used car market due to its innovative e-commerce platform and unique business model. As an online used car retailer, the company has transformed the traditional car buying experience in the US by allowing customers to browse, finance, and purchase vehicles entirely online, offering a selection of tens of thousands of cars. The company is famous for its unique “car vending machines”.
With services like home delivery and local pickup in over 300 US markets, Carvana offers an unparalleled level of convenience. The company’s customer-centric approach includes transparent pricing and detailed vehicle histories, along with a seven-day return policy that boosts customer confidence.
CVNA’s second quarter of 2024 was exceptional, showcasing the strength of its unique business model. The company saw a 33% increase in retail units sold and a 15% rise in revenue year-over-year. Carvana achieved record-breaking results, including positive net income and all-time highs in adjusted EBITDA and EBITDA margin. In Q2 2024, Adjusted EBITDA was $355 million, an increase of $200 million, while adjusted EBITDA margin was 10.4%, a 5.2 percentage point increase year-over-year.
Looking ahead, Carvana Co. (NYSE:CVNA) expects continued growth, projecting adjusted EBITDA of $1 billion to $1.2 billion for the full year 2024. This represents a significant increase from $339 million in 2023. The company is well-positioned for future expansion, with the physical capacity to handle approximately three times its current volume. Real estate from the acquisition of ADESA’s US physical auction business, consisting of 56 ADESA US locations totaling approximately 6.5 million square feet of buildings on more than 4,000 acres, could support vehicle reconditioning at a scale approximately eight times the company’s current run rate.
With plans for further improvements, combined with a vertically integrated supply chain that streamlines operations, Carvana Co. (NYSE:CVNA) has positioned itself well for growth in the expanding e-commerce automotive sector. As more consumers prefer online shopping, Carvana’s innovative strategies and strong market presence make it a promising investment opportunity.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 61 hedge funds held stakes in Carvana Co. (NYSE:CVNA). As of June 30, CAS Investment Partners holds 6.53 million shares of the company, valued at $840.65 million, making it CVNA’s most prominent shareholder.
Overall, CVNA ranks first among the 10 best used car stocks to buy according to hedge funds. While we acknowledge the potential of used car companies, our conviction lies in the belief that 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 CVNA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
