Investment management company Cove Street Capital recently released its “Small Cap Value Fund” third quarter 2022 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund returned -5.15% compared to -2.19% for the Russell 2000 Index and -4.61% for the Russell 2000 Value Index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Cove Street Capital highlighted stocks like CarGurus, Inc. (NASDAQ:CARG) in its third-quarter investor letter. Headquartered in Cambridge, Massachusetts, CarGurus, Inc. (NASDAQ:CARG) is an online marketplace for used cars. On November 25, 2022, CarGurus, Inc. (NASDAQ:CARG) stock closed at $12.96 per share. One-month return of CarGurus, Inc. (NASDAQ:CARG) was -10.99% and its shares lost 65.24% of their value over the last 52 weeks. CarGurus, Inc. (NASDAQ:CARG) has a market capitalization of $1.541 billion.
Cove Street Capital made the following comment about CarGurus, Inc. (NASDAQ:CARG) in its Q3 2022 investor letter:
“During the quarter, we started a new position in CarGurus, Inc. (NASDAQ:CARG). The company historically has been a lead generation business, helping car dealers find consumers who are looking to buy or sell a car online. CARG has been successful at this by having world-class search engine optimization (SEO) and search engine marketing (SEM) that helps them achieve top search results on Google. Consumers click these top links on Google when buying or selling a car and enter their information on the CARG website, generating a lead for CARG. CARG sells these high-quality leads to dealers for a significant profit (gross margin of 90%+). The lead generation business has hit maturity as CARG has almost penetrated the entire car dealer market in the US. CARG recently bought an Online Dealer to Dealer (D2D) platform, CarOffer, which helps car dealers sell cars to other dealers as well as buy cars from consumers online. There is a large amount of selling synergies between the Online D2D platform and the legacy lead generation business as they are selling to the same customer base: car dealers. CarOffer has been experiencing huge growth as it gains significant market share from physical dealer auctions. We have initiated a position in CARG after the market overpunished the stock due to a tough macro environment. Despite the current macro concerns, we feel CARG is still a high margin, high free cash flow generating business with significant room to grow the CarOffer business.”
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CarGurus, Inc. (NASDAQ:CARG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 23 hedge fund portfolios held CarGurus, Inc. (NASDAQ:CARG) at the end of the third quarter, which was 23 in the previous quarter.
We discussed CarGurus, Inc. (NASDAQ:CARG) in another article and shared the best-used car stocks to invest in. In addition, please check out our hedge fund investor letters Q3 2022 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.
