Is CarMax (KMX) Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. In this article we are going to take a look at smart money sentiment towards CarMax Inc (NYSE:KMX).

Is KMX stock a buy or sell? CarMax Inc (NYSE:KMX) has experienced a decrease in activity from the world’s largest hedge funds recently. CarMax Inc (NYSE:KMX) was in 46 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 54. Our calculations also showed that KMX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Dan Loeb of Third Point

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

At the end of December, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KMX over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in CarMax Inc (NYSE:KMX) was held by Akre Capital Management, which reported holding $706.5 million worth of stock at the end of December. It was followed by Third Point with a $120.4 million position. Other investors bullish on the company included Giverny Capital, Viking Global, and Appaloosa Management LP. In terms of the portfolio weights assigned to each position Silver Heights Capital Management allocated the biggest weight to CarMax Inc (NYSE:KMX), around 16.05% of its 13F portfolio. Lansing Management is also relatively very bullish on the stock, earmarking 13.75 percent of its 13F equity portfolio to KMX.

Since CarMax Inc (NYSE:KMX) has witnessed bearish sentiment from the smart money, we can see that there were a few funds that decided to sell off their positions entirely heading into Q1. It’s worth mentioning that Jack Woodruff’s Candlestick Capital Management sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $20.7 million in stock, and Robert Boucai’s Newbrook Capital Advisors was right behind this move, as the fund cut about $20.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 8 funds heading into Q1.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CarMax Inc (NYSE:KMX) but similarly valued. We will take a look at Shinhan Financial Group Co., Ltd. (NYSE:SHG), Waters Corporation (NYSE:WAT), Hewlett Packard Enterprise Company (NYSE:HPE), Citizens Financial Group Inc (NYSE:CFG), 10x Genomics, Inc. (NASDAQ:TXG), Celanese Corporation (NYSE:CE), and NVR, Inc. (NYSE:NVR). All of these stocks’ market caps are similar to KMX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $939 million. That figure was $1486 million in KMX’s case. NVR, Inc. (NYSE:NVR) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 bullish hedge fund positions. CarMax Inc (NYSE:KMX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KMX is 72.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on KMX as the stock returned 41.1% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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