Here's Recurve Capital's Views on its Largest Contributor, Carvana Co. (CVNA)

Recurve Capital, an investment management company, released its second-quarter 2025 investor letter. Recurve had a strong second quarter. A copy of the letter can be downloaded here. In Q2 2025, the fund returned +31% gross compared to +10.6% returns for the S&P 500 and 17.8% returns for the Nasdaq. YTD, the fund returned +14.8% gross and +12% net. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025.

In its second-quarter 2025 investor letter, Recurve Capital highlighted stocks such as Carvana Co. (NYSE:CVNA). Headquartered in Tempe, Arizona, Carvana Co. (NYSE:CVNA) is an e-commerce platform for buying and selling used cars. The one-month return of Carvana Co. (NYSE:CVNA) was 6.63%, and its shares gained 123.45% of their value over the last 52 weeks. On October 2, 2025, Carvana Co. (NYSE:CVNA) stock closed at $394.71 per share, with a market capitalization of $46.16 billion.

Recurve Capital stated the following regarding Carvana Co. (NYSE:CVNA) in its second quarter 2025 investor letter:

"Carvana Co. (NYSE:CVNA) was our largest contributor and Cogent was our largest detractor year-to-date. Followers of Recurve know that we have had a position in Carvana for many years. It has become our largest position by far and every decision not to sell despite its elevated concentration has been highly accretive to our performance. It’s also the position that has caused me to lose more sleep and learn more about myself as an investor than any other company in my 20+ year career.

Carvana offers a useful canvas to explore how I apply a decision tree framework to help navigate investment decisions. Many investors, including myself in the past, use an upside/base case/downside framework to evaluate their investment decisions, ultimately driving toward a risk/reward ratio. While the concept makes sense, in practice I have found it to be a poor framework for me because of its rigidity. Companies often overshoot to the upside and downside, and they rarely perform to the “base case.” A framework that breaks often is not very useful. Even worse, this framework can be a crutch that leads investors to sell at “upside” price targets or buy at “downside” price targets when both could lead to substantial sub-optimal outcomes (opportunity cost or loss of capital). Our goal is to find great companies that we can hold for years and as long as they keep creating significant shareholder value – not simply exit them the moment they approach a near-term, rigid upside price target..." (Click here to read the full text)

Carvana Co. (NYSE:CVNA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 91 hedge fund portfolios held Carvana Co. (NYSE:CVNA) at the end of the second quarter, up from 90 in the previous quarter.  While we acknowledge the potential of Carvana Co. (NYSE:CVNA) 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 Carvana Co. (NYSE:CVNA) and shared the list of stocks that will double in the next 5 years. In Q2 2025, Sands Capital Select Growth Strategy initiated a position in Carvana Co. (NYSE:CVNA), driven by its promising growth prospects. 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.