Makaira Partners Sells All 272,000 CarMax Shares Worth $18.3 Million

Makaira Partners fully exited its CarMax (KMX) stake in Q3, selling 272,203 shares worth roughly $18.29 million based on average quarterly pricing, and the position no longer appears in its portfolio as of Sept. 30. The divestiture occurred amid a reported 41% quarter-over-quarter decline in Makaira’s 13F-reportable AUM and follows CarMax’s own comment about a “challenging quarter”; CarMax metrics cited include TTM revenue $26.4bn, TTM net income $521.1m, market cap ~$5.1bn and a Nov. 14 close of $34.43. For investors, the sale signals manager de-risking and pressure on auto/used-vehicle demand but is small relative to CarMax’s market capitalization, implying limited market-moving impact absent further exits or operational deterioration.

Analysis

Market structure: Makaira’s $18.3M sale is economically immaterial to KMX (≈0.36% of $5.1B market cap) but symbolically amplifies already weak demand signals from CarMax’s recent quarter. Direct losers: KMX (F&I margins, wholesale realization risk) and leveraged balance-sheet participants; winners: aftermarket/parts (LKQ) and fleet buyers who can buy used cars at lower prices. Flow impact is likely short-lived (days–weeks) unless multiple funds follow; principal channel is sentiment, not a liquidity squeeze.

Risk assessment: Key tail risks are a >150bps rise in retail auto loan 30–90 day delinquencies, a >200–400bps gross-margin contraction from collapsing wholesale values, or regulatory action on F&I practices—each could trim EPS by 20–50% over 12 months. Immediate risks (days) are sentiment-driven volatility; short-term (weeks–months) hinge on Manheim/IAA wholesale price trajectories; long-term (quarters) depend on secular shifts to EVs and online retailing. Hidden dependency: auction liquidity and OEM trade-in flows materially drive KMX inventory turns.

Trade implications: Tactical short KMX exposure via defined-risk options and relative-value trades is preferred to naked shorts. Consider a 2% portfolio notional buy of Jan-2026 30/20 put spread (max loss = premium, target equity move to $25) with stop if KMX > $39. Pair trade: long LKQ (2%) vs short KMX (2%) for a 3–6 month horizon, target IRR ~15% differential.

Contrarian angle: The consensus may be overstating fundamental deterioration—Makaira cut positions as part of a 41% AUM downsizing, not pure KMX conviction; forced selling can create 10–20% rebounds if wholesale prices stabilize. Watch triggers: Manheim index moves >5% MoM or next KMX earnings miss; these will validate further downside or mark a buying opportunity.

Key Decisions for Investors

• Establish a defined-risk bearish position on KMX: allocate 2% of portfolio to a Jan-2026 30/20 put spread (buy Jan-26 $30 put, sell Jan-26 $20 put). Target: KMX $25 within 3–6 months; max loss = premium paid; implement stop-loss if KMX > $39 (≈+13%).
• Run a pair trade: long LKQ 2% of portfolio vs short KMX 2% (equal dollar). Hold 3–6 months; target relative outperformance of +15% (LKQ up or KMX down). Exit if LKQ underperforms by 10% or KMX outperforms by 10%.
• Overweight BBWI (BBWI) tactically: establish a 1–1.5% long position ahead of holiday comps, target +8–12% in 60–90 days; set stop-loss at -8% to protect against discretionary softness.
• Watch leading indicators for trade acceleration: if Manheim Used Vehicle Value Index falls >5% MoM or S&P auto-loan 30–90 day delinquencies rise >150bps in next 60 days, increase short KMX sizing by another 1–2% and widen put spreads for higher delta exposure.