Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at CarMax, Inc (NYSE:KMX) from the perspective of those elite funds.
Is CarMax, Inc (NYSE:KMX) a good stock to buy now? Money managers are getting more bullish. The number of long hedge fund bets improved by 13 in recent months. KMX was in 34 hedge funds’ portfolios at the end of the third quarter of 2016. There were 21 hedge funds in our database with KMX positions at the end of the previous quarter. At the end of this article we will also compare KMX to other stocks including Huaneng Power International Inc (ADR) (NYSE:HNP), Hanesbrands Inc. (NYSE:HBI), and XL Group plc (NYSE:XL) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, we’re going to analyze the key action surrounding CarMax, Inc (NYSE:KMX).
How have hedgies been trading CarMax, Inc (NYSE:KMX)?
At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a boost of 62% from the second quarter of 2016. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Charles Akre’s Akre Capital Management has the number one position in CarMax, Inc (NYSE:KMX), worth close to $264.5 million and accounting for 5.1% of its total 13F portfolio. The second most bullish fund manager is Markel Gayner Asset Management, led by Tom Gayner, holding a $262.1 million position; 6.8% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions consist of Gilchrist Berg’s Water Street Capital, Gavin M. Abrams’s Abrams Bison Investments and Francois Rochon’s Giverny Capital.
Consequently, some big names have jumped into CarMax, Inc (NYSE:KMX) headfirst. MIK Capital, managed by Kamyar Khajavi, assembled the most valuable position in CarMax, Inc (NYSE:KMX). According to its latest 13F filing, the fund had $42.8 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $24.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and Ken Griffin’s Citadel Investment Group.
Let’s go over hedge fund activity in other stocks similar to CarMax, Inc (NYSE:KMX). These stocks are Huaneng Power International Inc (ADR) (NYSE:HNP), Hanesbrands Inc. (NYSE:HBI), XL Group plc (NYSE:XL), and Autoliv Inc. (NYSE:ALV). This group of stocks’ market values resemble KMX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HNP | 1 | 6463 | -4 |
| HBI | 25 | 1016621 | -5 |
| XL | 22 | 436854 | 1 |
| ALV | 13 | 59661 | 3 |
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $380 million. That figure was $979 million in KMX’s case. Hanesbrands Inc. (NYSE:HBI) is the most popular stock in this table. On the other hand Huaneng Power International Inc (ADR) (NYSE:HNP) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks CarMax, Inc (NYSE:KMX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: none.
