In this article, we discuss the 5 best used car stocks to buy. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Used Car Stocks to Buy.
5. AutoNation, Inc. (NYSE: AN)
Number of Hedge Fund Holders: 24
AutoNation, Inc. (NYSE: AN) is a Florida-based automotive retailer that sells new and used cars. It is ranked fifth on our list of 10 best used car stocks to buy. The company’s shares have returned 110% to investors over the past twelve months. In earnings results for the second quarter, posted on July 19, the firm reported earnings per share of $4.83, beating estimates by $2.02. The revenue over the period was close to $7 billion, up 54% year-on-year and beating expectations by a whopping $910 million.
On July 20, investment advisory Truist kept a Hold rating on AutoNation, Inc. (NYSE: AN) stock but raised the price target to $110 from $100, citing the recent second quarter results and favorable business dynamics for the coming months as the reasons behind the update.
At the end of the first quarter of 2021, 24 hedge funds in the database of Insider Monkey held stakes worth $585 million in AutoNation, Inc. (NYSE: AN), up from 23 in the previous quarter worth $586 million.
In its Q1 2021 investor letter, Black Bear Value Partners, an asset management firm, highlighted a few stocks and AutoNation, Inc. (NYSE: AN) was one of them. Here is what the fund said:
“AutoNation has been a long-term holding for us dating back to the first year of the Fund. Management continues to make prudent decisions both investing in growth and shrinking the share count at cheap prices.
Most would not expect a global pandemic to benefit AutoNation, but the industry experienced a record year. Dealers have been able to increase profit margins due to a variable cost operating model and lower inventories. AutoNation has been able to materially reduce their operating expenses over the last year which will continue to benefit the business going forward…” (Click here to see the full text)
4. Group 1 Automotive, Inc. (NYSE: GPI)
Number of Hedge Fund Holders: 26
Group 1 Automotive, Inc. (NYSE: GPI) is placed fourth on our list of 10 best used car stocks to buy. The stock has returned 92% to investors over the past twelve months. The company sells new and used cars and is headquartered in Texas. On May 11, the company declared a quarterly dividend of $0.33 per share, a 6.5% increase from the previous dividend. The forward yield was 0.81%. The firm has a market cap of close to $3 billion and posted more than $10 billion in revenue last year.
On July 16, investment advisory Bank of America maintained a Buy rating on Group 1 Automotive, Inc. (NYSE: GPI) stock and raised the price target to $351 from $305, noting that a semiconductor shortage affecting sales was increasing pent-up demand for cars.
At the end of the first quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $304 million in Group 1 Automotive, Inc. (NYSE: GPI), up from 20 the preceding quarter worth $263 million.
3. CarGurus, Inc. (NASDAQ: CARG)
Number of Hedge Fund Holders: 29
CarGurus, Inc. (NASDAQ: CARG) is a Cambridge-based online marketplace for new and used cars. It is ranked third on our list of 10 best used car stocks to buy. The company’s shares have returned 12% to investors over the past year. On May 6, the firm posted earnings for the first quarter, reporting earnings per share of $0.33, beating market predictions by $0.10. The revenue over the period was $171 million, up more than 8% compared to the revenue over the same period last year and beating estimates by over $12 million.
On May 26, investment advisory RBC initiated coverage of CarGurus, Inc. (NASDAQ: CARG) stock with a Sector Perform rating and a price target of $30, highlighting that the firm was a solid asset for investors with many intriguing projects under development.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Atreides Management is a leading shareholder in CarGurus, Inc. (NASDAQ: CARG) with 2.6 million shares worth more than $63 million.
2. CarMax, Inc. (NYSE: KMX)
Number of Hedge Fund Holders: 46
CarMax, Inc. (NYSE: KMX) stock has offered investors returns exceeding 37% over the course of the past year. It is placed second on our list of 10 best used car stocks to buy. The firm runs a used vehicle retailer and is based in Virginia. It has a market cap of close to $22 billion and posted more than $20 billion in revenue in the last fiscal year. The firm recently beat market expectations on earnings per share and revenue for the first fiscal quarter, reporting a 138% year-on-year increase in revenue in the earnings report.
On July 16, investment advisory Bank of America maintained a Buy rating on CarMax, Inc. (NYSE: KMX) stock and raised the price target to $200 from $150, underlining that the firm would beat earnings expectations for the second quarter.
Out of the hedge funds being tracked by Insider Monkey, Virginia-based investment firm Akre Capital Management is a leading shareholder in CarMax, Inc. (NYSE: KMX) with 7.1 million shares worth more than $943 million.
In its Q1 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and CarMax, Inc. (NYSE: KMX) was one of them. Here is what the fund said:
“Beyond the benefit of ‘reopening,’ gains were led by companies experiencing positive, company-specific developments. Used car dealer CarMax was our top contributor, as the nationwide roll-out of its omnichannel car buying experience (at a dealership, online, or a combination of the two) continues to win fans in the form of new customers and investors alike.”
1. Carvana Co. (NYSE: CVNA)
Number of hedge fund holders: 64
Carvana Co. (NYSE: CVNA) is ranked first on our list of 10 best used car stocks to buy. The company’s shares have offered investors returns exceeding 121% over the course of the past twelve months. The firm owns and runs an ecommerce platform for new and used cars. It is based in Arizona. On June 30, the firm announced that it would be offering as-soon-as-next-day delivery service in the Wichita area of Kansas. The company now offers this service in close to 300 cities across the country.
On June 29, investment advisory Piper Sandler maintained an Overweight rating on Carvana Co. (NYSE: CVNA) stock and raised the price target to $16 from $14, noting that the firm had an easier path to valuation expansion and could use the balance sheet to underwrite loans.
At the end of the first quarter of 2021, 64 hedge funds in the database of Insider Monkey held stakes worth $7.5 billion in Carvana Co. (NYSE: CVNA), up from 63 in the preceding quarter worth $7 billion.
In its Q1 2021 investor letter, Steel City Capital LP, an asset management firm, highlighted a few stocks and Carvana Co. (NYSE: CVNA) was one of them. Here is what the fund said:
“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)
You can also take a peek at 10 Companies that Benefit From Crypto Mining and 10 Best Nickel Stocks to Buy Now.
