Investment management company Vulcan Value Partners recently released its second quarter 2024 investor letter. A copy of the letter can be downloaded here. The quarterly results were mixed. The firm faced stock price volatility with some of the companies in its portfolios but managed this by adhering to discipline and capitalizing on the volatility to invest in companies with improved price-to-value ratios. In the quarter, the fund’s Large Cap Composite returned -2.9% net of fees and expenses, the Small Cap Composite returned -0.1 % net, the Focus Composite returned -0.4% net, the Focus Plus composite returned -0.8% and the All-Cap Composite returned 1.1% net. For more information on the fund’s best picks in 2024, please check its top five holdings.
Vulcan Value Partners highlighted stocks like CarMax, Inc. (NYSE:KMX) in the second quarter 2024 investor letter. CarMax, Inc. (NYSE:KMX) is a used vehicle retailer headquartered in Richmond, Virginia. The one-month return of CarMax, Inc. (NYSE:KMX) was 13.20%, and its shares gained 0.61% of their value over the last 52 weeks. On July 26, 2024, CarMax, Inc. (NYSE:KMX) stock closed at $83.02 per share with a market capitalization of $12.958 billion.
Vulcan Value Partners stated the following regarding CarMax, Inc. (NYSE:KMX) in its Q2 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.
A happy customer inspecting a newly purchased used car with the help of a sales assistant.
CarMax, Inc. (NYSE:KMX) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held CarMax, Inc. (NYSE:KMX) at the end of the first quarter which was 38 in the previous quarter. The total gross profit of CarMax, Inc. (NYSE:KMX) in the first quarter was $792 million, down 3% year-over-year (see the details here). While we acknowledge the potential of CarMax, Inc. (NYSE:KMX) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed CarMax, Inc. (NYSE:KMX) and shared Alphyn Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
