Alphyn Capital Management, an investment management firm, released its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The Master Account of the fund returned -2.7% net in the second quarter compared to 4.3% for the S&P500 Index. As of June 30, 2024, the top ten holdings accounted for approximately 66% of the portfolio, and approximately 16% of the portfolio was held in cash. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Alphyn Capital Management highlighted stocks like CarMax, Inc. (NYSE:KMX) in the second quarter 2024 investor letter. CarMax, Inc. (NYSE:KMX) is a used vehicle retailer headquartered in Richmond, Virginia. The one-month return of CarMax, Inc. (NYSE:KMX) was 13.40%, and its shares lost 4.45% of their value over the last 52 weeks. On July 11, 2024, CarMax, Inc. (NYSE:KMX) stock closed at $79.71 per share with a market capitalization of $12.441 billion.
Alphyn Capital Management stated the following regarding CarMax, Inc. (NYSE:KMX) in its Q2 2024 investor letter:
“CarMax, Inc. (NYSE:KMX), previously a winning investment for us, has disappointed us recently. As per the discussion at the start of this letter, I am re-underwriting my thesis carefully. Two key factors impacted CarMax: the rise of online competitors like Carvana and franchised dealerships entering the used car market and a post-pandemic environment with higher financing costs and less affordable cars. Their traditional brick-and-mortar, no-haggle model, while successful historically, faced challenges. In response, CarMax invested significantly in omnichannel offerings and technology to enable efficient car sourcing from consumers and dealers in a supply-constrained market. While this strengthens their long-term position, it has put temporary pressure on profits. Moreover, CarMax prioritizes consistent margins per car (~$2,500), which has impacted sales volume in recent quarters compared to competitors focused primarily on sales growth.
The used car market will eventually normalize, which should lead to positive operational leverage in CarMax from its recent investments. The company benefits from long-tenured management that has successfully navigated difficult macro conditions before. Management has shown adaptability with the omnichannel rollout and willingness to experiment with auto financing for lower-credit customers. I am carefully assessing the risk-reward against cash and other opportunities that I am looking into.”
A happy customer inspecting a newly purchased used car with the help of a sales assistant.
CarMax, Inc. (NYSE:KMX) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held CarMax, Inc. (NYSE:KMX) at the end of the first quarter which was 38 in the previous quarter. The total gross profit of CarMax, Inc. (NYSE:KMX) in the first quarter was $792 million, down 3% year-over-year (see the details here). While we acknowledge the potential of CarMax, Inc. (NYSE:KMX) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Vulcan Value Partners added CarMax, Inc. (NYSE:KMX) to its portfolio in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.