Giverny Capital, an asset management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, Giverny Capital Asset Management’s model portfolio declined by 8.21%, net of fees, vs. a decline of 4.60% for the Standard & Poor’s 500 Index. For the trailing twelve-month period, the GCAM model generated a return of 9.63% vs. 15.65% for the Index, also net of fees. 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, Giverny Capital Asset Management mentioned CarMax, Inc. (NYSE:KMX) and explained its insights for the company. Founded in 1993, CarMax, Inc. (NYSE:KMX) is a Richmond, Virginia-based used vehicle retailer with a $14.3 billion market capitalization. CarMax, Inc. (NYSE:KMX) delivered a -31.58% return since the beginning of the year, while its 12-month returns are down by -33.13%. The stock closed at $89.10 per share on April 28, 2022.
Here is what Giverny Capital Asset Management has to say about CarMax, Inc. (NYSE:KMX) in its Q1 2022 investor letter:
“As for our other big decliners, Carmax is the country’s largest seller of used autos. Last year, amid supply chain shortages, production of new cars slowed. This created huge demand for used cars, and prices surged. Carmax opted to hold its gross profit dollars per vehicle flat in this environment, which benefits customers. If historically Carmax sold a used car for an average price of $21,000 with a $2,100 gross profit, in 2022 it sold used cars for an average price of $29,000 with a $2,200 gross profit. This decision was not well-received by Wall Street. In fairness to the critics, Carmax faced inflationary costs in wages and other areas that may have justified charging higher mark-ups. Still, Carmax sold 23% more vehicles in 2021 than in 2020, earned a lot more money and grew its market share to 4% of all transactions for used cars under 10 years old, from 3.5% a year ago. Presumably, the decision to price responsibly won it some customer goodwill that will result in future business.
Recently, those very high prices for used cars have caused demand to wane. Carmax may sell fewer cars in 2022 than in 2021, which unnerves investors. But it continued to gain market share in early 2022 and still generate healthy profits. Carmax has become quite inexpensive relative to its proven ability to grow profitably in an enormous industry. A 4% market share leaves a lot of room for growth. We added modestly to our position during the first quarter.”
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Our calculations show that CarMax, Inc. (NYSE:KMX) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. CarMax, Inc. (NYSE:KMX) was in 35 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 36 funds in the previous quarter. CarMax, Inc. (NYSE:KMX) delivered a -19.00% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on CarMax, Inc. (NYSE:KMX) 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.
