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Here’s Why Alphyn Capital is Holding Carmax (KMX)

Alphyn Capital Management, an investment management firm, released its third-quarter 2023 investor letter. The same can be downloaded here. The Master Account of the fund returned -1.1% net in the third quarter compared to -3.3% for the S&P500 Index. As of September 30, 2023, the top ten holdings accounted for approximately 71% of the portfolio, and approximately 8.6% of the portfolio was held in cash. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Alphyn Capital Management highlighted stocks like CarMax, Inc. (NYSE:KMX) in the third quarter 2023 investor letter. Headquartered in Richmond, Virginia, CarMax, Inc. (NYSE:KMX) is a used vehicle retailer. On November 24, 2023, CarMax, Inc. (NYSE:KMX) stock closed at $64.16 per share. One-month return of CarMax, Inc. (NYSE:KMX) was 5.75%, and its shares lost 2.14% of their value over the last 52 weeks. CarMax, Inc. (NYSE:KMX) has a market capitalization of $10.18 billion.

Alphyn Capital Management made the following comment about CarMax, Inc. (NYSE:KMX) in its Q3 2023 investor letter:

"CarMax, Inc. (NYSE:KMX)'s share price performance has been underwhelming in recent years. While the company is well-managed, it operates in a cyclical industry that has been profoundly affected by several factors. The COVID-19 pandemic disrupted supply chains, driving up car prices, which initially boosted the stock price but later weighed on as affordability became a growing concern. Additionally, rising interest rates have made car financing more expensive, and increased investment in building out CarMax's omnichannel offerings has been necessary to compete with new digital-first companies like Carvana.

In hindsight, some of these challenges could have been foreseen, prompting an earlier exit from the investment. However, as a long-term investor, I recognize that all companies face periods of difficulty, and economic cycles are inevitable. The more pertinent question is whether CarMax, with its experienced management team, strategic investments, substantial scale, and customer-centric service offerings, is well-positioned to retain its leadership position and resume growth when the cyclical tide turns in its favor. I am willing to hold my position for now, but I am closely monitoring the company's performance."

Used cars, used car, selling a used car
Used cars, used car, selling a used car

Copyright: sonyae / 123RF Stock Photo

CarMax, Inc. (NYSE:KMX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held CarMax, Inc. (NYSE:KMX) at the end of third quarter which was 40 in the previous quarter.

We discussed CarMax, Inc. (NYSE:KMX) in another article and shared Diamond Hill Large Cap Strategy's views on the company. In addition, please check out our hedge fund investor letters Q3 2023 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.