CarMax, Inc. (KMX)

‘Old is Gold’ and that’s what CarMax weighs its whole business on! CarMax after an excellent first half is all set for a stable second half as well. A leading operator in the sale of used vehicles, KMX operates 71 used car superstores in 34 markets, including 26 mid-sized markets and 8 large markets. Year to date August 31, 2006, KMX has sold a whooping 311,241 used cars, representing 94% of the total 330,296 vehicles the company sold at retail. This augurs well for the company as used vehicle sales comprise nearly half of US auto retail market. In 2005, there were an estimated 44 million used vehicles sold in the U.S. compared with approximately 17 million new vehicles. The industry sales for late -model vehicles that are 1 to 6 years old which is the prime focus for CarMax are estimated at $280 billion in annual sales and 21 million units per year.
CarMax acquires its used vehicle inventory directly from consumers through its unique in-store appraisal process which allows the company to maintain healthy margins.
The improving same store sales in the backdrop of tough economic conditions signify the strong fundamentals of the company. Its ROE of 18.26% which is much higher than the 11.4% of the industry coupled with its net profit margin and debt to equity leverage indicates its superiority over its peers.
KMX expects to open 2 standard Superstores & 4 Satellite Superstores by the end of FY07. We expect the same store sales and the earnings of the company to grow consistently in FY07.
In light of the strong consumer preferences towards used vehicles, favorable location and consistent past performance we recommend it a market overperform.

Carmax is an amazing used car company. They make good use of technology to manage their inventory and make online searching simple. Their sales system is organized but not overbearing. They will appraise your car and offer to buy it even if you don't intend to buy a car from them. They work hard to get good financing regardless of your credit. There is no negotiating, their cars are a little more expensive than average, but you know they have inspected each car thoroughly and worked with you through the process. If you're not happy with the terms, they will simply decline to do business with you. There are no games, no pressure, etc. And apparently it pays off in their sales per square foot. As oil remains volitile and the economy shifts around, there will always be a market for buying and selling cars. I see Carmax remaining at the top.

Carmax is a used car sales company located throughout the United States that was a spin-off company from Circuit City about 6 years ago. They have a money-back guarantee policy and no-haggle pricing, which seems to give them a competitive advantage in the used car market. I believe that their autos can be transferred nationwide to / from any of their dealerships, making the used car selection extensive through Carmax.

An average Carmax used car sometimes seems a little on the high side, but when you consider that you have a money-back guarantee, it would seem to give a novice used car purchaser a bit more of a comfort level / base from which to make a used car purchase decision through Carmax.

With the cost of new cars seemingly always on the rise, and the near-extinction of the American Middle Class citizen that has deep enough pockets to find a new car affordable, Carmax seems to fill the void for car buyers who may be new to the used car purchase, and would like a little more degree of comfort by having a money back guarantee on their purchase, with no strings attached.

I am not a KMX shareholder at the moment, but I wish now I bought stock when I first started watching it about 6 years ago (about $5 / share). Carmax is in the thriving used car industry, and seems to have good purchase policy from which someone new to the used car market would find attractive. Many people like to trade-in cars that have a lot more life expectancy. There is an abundance of fine used cars in the USA.

car market is 300 billion...KMX is the largest used and a drop in the bucket of total market. Upside is beyond imagination, near wonderment. Comps will fluctuate going forward....total revenue and earnings will go up, up, up for many year$

This is a longterm growth story. Price is a bit ahead of itself as of the date of this pick though. KMX is to used cars what WMT and HD are to their segments. Except with KMX, nobody not even WMT has been able to go head to head with them. KMX has a small slice of the used car market nationwide and has not even reached many of the major NorthEastern markets yet. The industry is highly fragmented, which provides the ideal opportunity for a "big box" company to come in and consolidate. Buy on any weakness into the mid-$30s.

CarMax has a great business model and is very customer friendly. Used car market should improve in a down economy with lower prices needed by consumers.

carfax is appealing to the average american car buyer.it's a no haggle philosphy,with great service,and quality cars.i have visited one to check it out.even higher end buyers are now shopping there...no matter how new cars are selling,carmax will do well,and has a tremendous niche.i am buying it right now...

Carmax continues gaining market share in a high-margin fragmented sector. The business model shifts the paradigm so that analysts can't see the change occuring. This is a broken stock but an excellent company. The assumption that specialty retail will suffer in times of economic downtrend does not apply to Carmax, because of the value inherent in used products. The demand for their products is inelastic. Forget the economy and go long, long, long on Carmax. Deal closer: they optimize margin in their pricing model by taking advantage of nationwide inventory/sales data throughout the marketplace.

This stock has been under appreciated since I started following it (and buying it) a couple of years ago. It's a great business model and will eventually appeal to all those who want hassle-free transportation. Gas prices may keep it depressed but eventually I think it'll do well.

Fanatical, talented management. Have only just begun to penetrate their potential market. Hard for a competitor to duplicate their model. Brand will develop as they further penetrate their market, and there's nothing better than a good brand that is hard to duplicate.

Great investors like Buffet and Chris Davis have bought in at higher prices. Good to buy now, given price discount due to recession concerns. But people in America will always be buying used cars.

When I was looking at new cars recently the salesman told me that rather than trade mine in go to carmax. I went to carmax and ended up buying there too. I might as well while i was there right? When you have your compitition recomending you to prospective customers, you must be doing something right. Also, Buffet has been adding to his position in this one recently. Thats good enough for me.

I like the growth story here -- used cars will be in demand as the consumer feels more pinched. There is a need for a strong honest player in this industry AND its been beat down recenlty. Up-Up-and-AWAYYYYY

Lot of growth potential, few real competitors - and the competitors that do exist are at a disadvantage on price and service, two pretty important things! Positioned to dominate an inefficient and fragmented market.

It seems as though this company's stock follows a trend contrary to the overall market over the long term. I also believe the overall market will be down this next year. This stock has shown that it's in a cyclical uptrend and should remain that way for the next few months.

Carmax has had a great growth story, a strong business model, strong stewardship, and plenty of room left to grow. The stock took a tumble yesterday, and slid more today. I think this is a good time to buy. The used-car dealership industry is highly fragmented, and no one dealer can match KMX's inventory and bargaining power. True, anyone else could copy their business model, but KMX has a pretty big lead, and I imagine other dealers are too busy competing locally to expand nationally. Overall, KMX accounts for only 1% of total US used-car sales, so it has a lot of room to expand. Short-term, their results are vulnerable to consumer spending and the economy. And their Q4 results weren't as spectacular as the market wanted. The stock tumbled 8%, which was completely irrational. Long-term, KMX will outperform.

If you have ever seen one of these places..well, there's nothing like it. They will take over the world.

Buffet liked it at $20, must be better even here...

http://www.bloggingstocks.com/2007/12/21/best-stocks-for-2008-a-buffett-bet-with-carmax-kmx/

I am betting against Buffett here. Might night be the smartest thing to do with real money.

If a recession hits, more people will buy second hand cars