CAS Investment Partners, an asset management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. During the three months ended March 31, 2022, the fund reported a loss on a mark to market basis net of all fees, expenses, and performance allocations of 26.7%. The broad market as represented by the SPY ETF including dividends was down 4.6% during the same period. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, CAS Investment Partners mentioned Carvana Co. (NYSE:CVNA) and explained its insights for the company. Founded in 2012, Carvana Co. (NYSE:CVNA) is a Tempe, Arizona-based used car dealer company with a $10.7 billion market capitalization. Carvana Co. (NYSE:CVNA) delivered a -73.91% return since the beginning of the year, while its 12-month returns are down by -79.09%. The stock closed at $60.47 per share on May 02, 2022.
Here is what CAS Investment Partners has to say about Carvana Co. (NYSE:CVNA) in its Q1 2022 investor letter:
“In his 2016 essay The Agony of High Returns, Morgan Housel lays out the experience of owning the best performing stocks of the prior decades. His point, articulated elegantly and demonstrated compellingly, is that the owners of the best performing stocks invariably must endure many, often substantial drawdowns. The simple fact is stocks do not rise in straight lines.
We are in the midst of one of the more substantial drawdowns since the inception of the partnership. That these sorts of drawdowns are to be expected and are a normal part of investing over the long term does not make them fun.
While a number of our holdings are generally progressing well and the stocks appear to be down for no obvious identifiable business reasons, our largest holding, Carvana, is in the midst of a confluence of challenges that obscure what I believe to be its very bright future. It is my observation from business history that few great businesses are built without mistakes, setbacks and challenges. In retrospect, these challenges appear obviously soluble taking the form of mere blips on the path of a company’s inexorable rise. In the moment, however, they can appear insurmountable and terrifying.
Carvana’s challenges, especially when coupled with the precipitous decline in its stock price, clearly seem terrifying, however as I will explain in this letter, I believe that in due time we will look back at them as bumps in road on the company’s path to success…” (Click here to see the full text)
Photo by Nima Sarram on Unsplash
Our calculations show that Carvana Co. (NYSE:CVNA) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Carvana Co. (NYSE:CVNA) was in 56 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 58 funds in the previous quarter. Carvana Co. (NYSE:CVNA) delivered a -63.30% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Carvana Co. (NYSE:CVNA) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
