Alphyn Capital Management Exited CarMax (KMX) as Share Price Stagnated

Alphyn Capital Management, an investment management firm, released its second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The Master Account of the fund returned 12.4% net in the second quarter compared to 10.9% for the S&P 500 Index. As of the second quarter of 2025, the top ten holdings accounted for approximately 65% of the portfolio, and approximately 17% of the portfolio was held in cash. Market conditions remained volatile in Q2 due to ongoing tariff developments and evolving interest rate projections. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second quarter 2025 investor letter, Alphyn Capital Management highlighted stocks such as CarMax, Inc. (NYSE:KMX). CarMax, Inc. (NYSE:KMX) is a used vehicle retailer headquartered in Richmond, Virginia. The one-month return of CarMax, Inc. (NYSE:KMX) was 1.26%, and its shares lost 16.02% of their value over the last 52 weeks. On July 10, 2025, CarMax, Inc. (NYSE:KMX) stock closed at $66.94 per share, with a market capitalization of $10.05 billion.

Alphyn Capital Management stated the following regarding CarMax, Inc. (NYSE:KMX) in its second quarter 2025 investor letter:

I fully exited CarMax, Inc. (NYSE:KMX) after several years in which the share price stagnated while peers such as Carvana captured most of the market’s enthusiasm. CarMax long occupied a place in the portfolio as the scale player in US used vehicle retail, with proprietary auction data, nationwide reconditioning capacity, and a finance arm that historically captured a healthy share of the value chain.

CarMax still needs to demonstrate that its significant investment in technology, reconditioning capacity, and finance operations can translate into faster unit growth and higher margins. The company still faces several other challenges, including elevated rates that pressure both consumer demand and the contribution from CarMax Auto Finance, high inventory carrying costs, and reconditioning expenses that weigh on gross profit. Additionally, new entrants continue to nibble at the share. Meanwhile, wholesale volumes remain depressed due to the tight supply of cars, and retail turnover remains muted.

CarMax, Inc. (NYSE:KMX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held CarMax, Inc. (NYSE:KMX) at the end of the first quarter, compared to 57 in the previous quarter. In the first quarter, CarMax, Inc. (NYSE:KMX) delivered total sales of $7.5 billion, up 6% compared to last year. While we acknowledge the potential of KMX as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered CarMax, Inc. (NYSE:KMX) and shared the list of best cyclical stocks to buy. In addition, please check out our hedge fund investor letters Q2 2025 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.