CarMax: No Competitive Advantages And Still Too Expensive
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Tangerine Tan Capital3.08K FollowersFollow5ShareSavePlay(6min)CommentsSummaryCarMax (KMX) remains unattractive due to lack of competitive advantages and weak capital efficiency, justifying my continued hold rating.KMX's latest quarter showed a double beat, but EPS fell 46% and retail used sales dropped 8%, highlighting ongoing business challenges.Despite a lower P/E of 11x, KMX's 2% ROIC and 1.87% profit margin signal value destruction and industry-wide margin pressures. JHVEPhoto/iStock Editorial via Getty Images The CarMax Investment Thesis Two investors whom I greatly respect, Akre Capital Management and Giverny Capital Management, had held a position in CarMax (KMX) for a long time in their funds. That's why I took a closer look atThis article was written byTangerine Tan Capital3.08K FollowersFollowMy primary area of concentration will be on identifying companies of exceptional caliber, with a proven ability to reinvest capital for impressive returns. The ideal scenario is for these companies to demonstrate a long-term capability of capital compounding, with a high enough compound annual growth rate to potentially deliver tenfold returns or even greater.My approach is to maintain a long-term perspective on these companies, as I believe this will generate higher returns compared to the market index, in a rapidly evolving investment landscape where short-term holdings are becoming increasingly prevalent.I primarily adopt a conservative investment strategy, but occasionally I may pursue opportunities with a favorable risk-reward ratio where the potential upside is substantial and downside is limited. These ventures are carefully considered and allocated a proportional amount within my portfolio to maintain overall stability.Bachelor's degree in finance and accounting All ideas and articles are provided for informational and educational purposes. Nothing contained herein is investment advice or should be construed as investment advice. All decisions that you make after reading our articles and reports are 100% your responsibility.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.