5 Best Auto and Truck Dealership Stocks to Buy

In this article, we will take a look at the 5 best auto and truck dealership stocks to buy now. If you want to explore similar stocks, you can go to 10 Best Auto and Truck Dealership Stocks to Buy.

5. AutoNation, Inc. (NYSE:AN)

Number of Hedge Fund Holders: 34

AutoNation, Inc. (NYSE:AN) was spotted on 34 investors’ portfolios at the end of Q4 2022 that held positions worth $653 million in the company. As of December 31, AQR Capital Management is the largest shareholder and has a position worth $109 million.

Wall Street sees upside to AutoNation, Inc. (NYSE:AN). This April, Guggenheim raised his price target on AutoNation, Inc. (NYSE:AN) to $184 from $181 and maintained a Buy rating on the shares.

On April 20, AutoNation, Inc. (NYSE:AN) announced earnings for the fiscal first quarter of 2023. The company’s revenue for the quarter amounted to $6.40 billion and the company reported an EPS of $6.05, outperforming EPS expectations by $0.31. AutoNation, Inc. (NYSE:AN) has returned 23.88% to investors over the past 6 months and is placed fifth among the best auto and truck dealership stocks to buy now.

4. Carvana Co. (NYSE:CVNA)

Number of Hedge Fund Holders: 36

Carvana Co. (NYSE:CVNA) is an American auto dealership company that operates an e-commerce platform for buying and selling used cars. As of April 28, the stock has returned 49.89% to investors on a year-to-date basis. Carvana Co. (NYSE:CVNA) is one of the best auto and truck dealership stocks to buy now, according to hedge funds.

Over the past 3 months, Carvana Co. (NYSE:CVNA) has received 2 Buy ratings and 13 Hold ratings from Wall Street analysts. The stock has an average price target of $10.27, which implies an upside of 47.98% from current levels.

Carvana Co. (NYSE:CVNA) was a part of 36 hedge funds’ portfolios at the close of the fourth quarter of 2022. These funds held positions worth $209 million in the company. As of December 31, Spruce House Investment Management is the most prominent investor in the company and holds a position worth $47 million.

ClearBridge Investments made the following comment about Carvana Co. (NYSE:CVNA) in its Q4 2022 investor letter:

“We exited our position in online automotive retailer Carvana Co. (NYSE:CVNA), in the consumer discretionary sector. After being one of the portfolio’s top performers over the last few years, Carvana has struggled due to a cyclical downtrend in used car volumes and prices as well as investor concern about the company’s ability to fund future growth. We felt the combination of growing macro uncertainty combined with weakening fundamentals justified finally closing the position.”

3. CarMax, Inc. (NYSE:KMX)

Number of Hedge Fund Holders: 38

On April 11, CarMax, Inc. (NYSE:KMX) posted strong earnings for the fiscal fourth quarter of 2023. The company generated a revenue of $5.72 billion and reported earnings per share of $0.44, outperforming EPS expectations by $0.20. CarMax, Inc. (NYSE:KMX) is placed third on our list of the best auto and truck dealership stocks to buy now.

On April 14, Oppenheimer analyst Brian Nagel raised his price target on CarMax, Inc. (NYSE:KMX) to $85 from $75 and reiterated an Outperform rating on the shares. As of April 28, the stock has gained 15.48% year to date.

CarMax, Inc. (NYSE:KMX) was held by 38 hedge funds at the close of Q4 2022. These funds disclosed positions worth $932 million in the company. As of December 31, Diamond Hill Capital is the top shareholder and has a stake worth $327 million.

Alphyn Capital Management made the following comment about CarMax, Inc. (NYSE:KMX) in its Q1 2023 investor letter:

“Despite contributing positively to the portfolio, CarMax, Inc. (NYSE:KMX)’s performance ranked among the bottom five positions during a period when most of our holdings experienced gains.

CarMax suffers from difficult macro conditions coinciding with increased investment as car retail is increasingly moving online.

High prices (stemming from COVID-induced supply constraints on new cars and increased demand due to stimulus money filtered down to the used car market) have impacted used car affordability. Meanwhile, recent interest rate hikes have worsened the situation. CarMax has surrendered some market share to maintain gross margins in this more challenging market, while CarMax Auto Finance (CAF), which generates profits from the spread between auto loan rates charged to consumers and rates paid in securitization markets, has faced squeezed margins…’’ (Click here to read the full text)

2. Lithia Motors, Inc. (NYSE:LAD) 

Number of Hedge Fund Holders: 40

Wall Street is bullish on Lithia Motors, Inc. (NYSE:LAD). This April, Guggenheim analyst Jonathan Elias revised his price target on Lithia Motors, Inc. (NYSE:LAD) to $320 from $332 and maintained a Buy rating on the shares.

On April 19, Lithia Motors, Inc. (NYSE:LAD) announced earnings for the first quarter of fiscal 2023. The company reported an EPS of $8.44 and generated a revenue of $6.97 billion, up 4% year over year. As of April 28, the stock has gained 11.48% over the past 6 months and is trading at a PE multiple of 5x. Lithia Motors, Inc. (NYSE:LAD) is ranked among the best auto and truck dealership stocks to buy now.

At the end of Q4 2022, 40 hedge funds were long Lithia Motors, Inc. (NYSE:LAD) and held stakes worth $1.5 billion in the company. Of those, Abrams Capital Management was the leading investor in the company and disclosed a position worth $481 million.

Here is what Right Tail Capital had to say about Lithia Motors, Inc. (NYSE:LAD) in its Q1 2023 investor letter:

“The original research premise fit right into Right Tail’s wheelhouse: a set of good businesses trading at attractive long-term valuations. Valuations look inexpensive at mid to high single digit multiples of earnings. Historically, these businesses have traded at 10-15x P/E multiples despite having more leverage and holding more inventory than they do today. In some ways, the historical multiples feel appropriate given their delicate relationships with manufacturers and cyclicality; on the other hand, these businesses have produced solid mid-teens returns with attractive reinvestment opportunities suggesting they are better than average companies. Adding another wrinkle to the puzzle, these businesses have over-earned the last few years due to Covid (car shortages, consumers flush with cash, etc.).

As I began the work, the compelling return potential warranted additional research. Lithia Motors (LAD), for example, has laid out a 2025 earnings per share target of $55-60. If the company reaches $55 in earnings and trades at a 12x P/E, we’d have a stock price of $660 – this would be a triple from today’s prices and produce a ~45% IRR over 3 years. The businesses are also producing lots of cash currently (LAD has earned ~$40 per share the last few years) creating additional capital allocation optionality.”

1. Copart, Inc. (NASDAQ:CPRT)

Number of Hedge Fund Holders: 48

As of April 28, Copart, Inc. (NASDAQ:CPRT) has returned 37.45% to investors over the past 6 months. The stock is the best auto and truck dealership stock to buy now according to hedge funds.

This February, Guggenheim analyst Jonathan Elias raised his price target on Copart, Inc. (NASDAQ:CPRT) to $82 from $75 and maintained a Buy rating on the shares.

48 hedge funds disclosed having stakes in Copart, Inc. (NASDAQ:CPRT) at the close of Q4 2022. The total value of these stakes amounted to $799 million. As of December 31, Point72 Asset Management is the dominant stockholder in the company and has a stake worth $155 million.

Madison Investments made the following comment about Copart, Inc. (NASDAQ:CPRT) in its Q1 2023 investor letter:

“Despite being long-time admirers of both its business model and top-notch executive team, Copart, Inc. (NASDAQ:CPRT) continues to surprise us with its resilient revenue and profits even in the face of various headwinds in the salvage car market. One positive factor is that high used car prices are helping to prop up salvage car auction values, which prop up Copart revenues. Even as unit growth in its core business remains challenged, the company is finding ways to grow in newer, related areas.”

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