CarMax Inc (KMX): Hedge Fund Sentiment Unchanged

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about CarMax Inc (NYSE:KMX).

CarMax Inc (NYSE:KMX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 46 hedge funds’ portfolios at the end of March. Our calculations also showed that KMX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Kellogg Company (NYSE:K), Futu Holdings Limited (NASDAQ:FUTU), and Genmab A/S (NASDAQ:GMAB) to gather more data points.

To the average investor there are a multitude of metrics shareholders put to use to assess publicly traded companies. A duo of the most under-the-radar metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best money managers can outperform their index-focused peers by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

David Tepper of Appaloosa Management LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a glance at the fresh hedge fund action regarding CarMax Inc (NYSE:KMX).

Do Hedge Funds Think KMX Is A Good Stock To Buy Now?

At Q1’s end, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards KMX over the last 23 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Akre Capital Management held the most valuable stake in CarMax Inc (NYSE:KMX), which was worth $943.7 million at the end of the fourth quarter. On the second spot was Third Point which amassed $145.9 million worth of shares. Giverny Capital, Appaloosa Management LP, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to CarMax Inc (NYSE:KMX), around 20.89% of its 13F portfolio. Lansing Management is also relatively very bullish on the stock, earmarking 14.59 percent of its 13F equity portfolio to KMX.

Since CarMax Inc (NYSE:KMX) has witnessed falling interest from hedge fund managers, it’s easy to see that there was a specific group of money managers that slashed their full holdings in the first quarter. Intriguingly, Andreas Halvorsen’s Viking Global said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, worth about $75 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $29.2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to CarMax Inc (NYSE:KMX). We will take a look at Kellogg Company (NYSE:K), Futu Holdings Limited (NASDAQ:FUTU), Genmab A/S (NASDAQ:GMAB), Church & Dwight Co., Inc. (NYSE:CHD), International Paper Company (NYSE:IP), CNH Industrial NV (NYSE:CNHI), and Plug Power, Inc. (NASDAQ:PLUG). All of these stocks’ market caps are similar to KMX’s market cap.

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As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $634 million. That figure was $2031 million in KMX’s case. International Paper Company (NYSE:IP) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks CarMax Inc (NYSE:KMX) is more popular among hedge funds. Our overall hedge fund sentiment score for KMX is 80.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately KMX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KMX were disappointed as the stock returned -14.7% since the end of the first quarter (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.