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Baron Funds Comments on CarMax

August 24, 2012 | About:
Holly LaFon

Holly LaFon

249 followers
From Baron Funds' second quarter commentary:

With $10 billion in annual sales, CarMax, Inc. (KMX) is the nation's largest retailer of used cars. Its shares declined 25.1% during the second quarter as comparable store sales gains decelerated slightly from the first period.We believe CarMax's growth prospects remain bright as the company transforms the used-car buying experience nationwide with its superstores. CarMax also has a rapidly growing wholesale division, now the third largest auto auction business in the country. CarMax, Inc. is the nation's largest retailer of used cars. At the time of this writing, shares have rebounded by double digits as its sales outlook seems to have improved. The company is currently working through a short term shortage of late-model inventory, as the '09 recession led to a steep drop in new car sales, disrupting the regular pattern of two to four year old cars coming through CarMax's appraisal lanes. However, with the average age of cars on the road at an alltime high 11 years, we believe there exists significant pent-up demand for the company's high-quality, reconditioned and like-new inventory and that this supply shortage will reverse as new vehicle sales continue to improve. Long-term, we see bright prospects for the company's growing network of 110 superstores as it leverages its national advertising and infrastructure. CarMax's wholesale division offers another growth lever. (Matt Weiss)

Rating: 3.5/5 (2 votes)

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