Investment Manager Ditches CarMax Stock Amid Market Concerns

Hutchinson Capital Management disclosed in a Nov. 12, 2025 SEC filing that it sold its entire 148,230-share CarMax stake (≈$9.96 million), eliminating a position that represented roughly 1.8% of the fund’s 13F AUM. CarMax closed at $34.14 on Nov. 11, 2025, down 55.54% over the past year, with trailing-12-month revenue of $27.79 billion and net income of $521.07 million; the firm cited weak used-car demand, higher interest rates and competition from online rivals like Carvana as pressure points. The liquidation signals negative institutional positioning and underscores ongoing fundamental and demand headwinds for CarMax that could weigh on the stock absent a turnaround.

Analysis

Market structure: Hutchinson’s full exit from a 148,230-share (≈$9.96M, 1.8% of its AUM) CarMax (KMX) stake is symptomatic of a market rotating away from bricks‑and‑mortar used‑car retail given a ~55% YTD KMX decline. Direct winners: online marketplaces (CVNA) and digital retail/software providers that lower transaction costs; losers: KMX, floorplan lenders, and subprime auto financiers who absorb inventory markdowns. Pricing power is shifting toward lower‑cost digital sellers, compressing margins for store‑heavy players over the next 3–12 months.

Risk assessment: Tail risks include a sharp rise in auto‑ABS delinquencies (e.g., +200–300bps) that would force tighter financing and deeper wholesale price resets, or a liquidity shock to KMX’s floorplan financing within 6–9 months. Near term (days–weeks) expect momentum selling and elevated IV in KMX options; medium term (3–12 months) fundamentals will track CPI, Fed moves, and used‑car indices (Manheim) — recovery unlikely until sequential demand improves by >5% MoM for two quarters. Hidden dependencies: third‑party finance partnerships and wholesale auction price discovery can amplify shocks.

Trade implications: Tactical short bias on KMX while protecting capital: prefer defined‑risk put spreads (3‑6 month) or buying protection if delta exposure >1% of book; rotate proceeds into large caps with stable cash flows (MSFT, GOOGL, AAPL, BRK.B) and selective consumer cyclicals with limited auto‑loan exposure. Consider a relative‑value pair: long GOOGL or MSFT vs short KMX for 3–12 months to capture sector divergence; monitor ABS delinquencies and Manheim index as stop/trim triggers.

Contrarian angles: The selloff may overprice structural downside — KMX still generates positive EBITDA and could see mean reversion if Fed cuts rates within 6–9 months or wholesale prices stabilize; a disciplined, small asymmetric long (1% position) with a $28 entry trigger could pay off if Manheim 3‑month change turns positive >3%. Historical parallels (post‑2010 cyclical recovery in used cars) show large rebounds when consumer financing re‑liquefies; downside risk remains high if auto credit deteriorates.

Key Decisions for Investors

• Initiate a defined‑risk bearish trade on KMX: buy a 3‑month 35/25 put spread sized to 1–2% portfolio risk, target 20–40% downside, and unwind if KMX rises above $42 (≈+23%) or if Manheim index improves >3% MoM for two consecutive months.
• Execute a pair trade: overweight MSFT or GOOGL by 2–3% of portfolio and short KMX equal‑dollar at 1–1.5% notional for a 3–12 month horizon to capture secular tech strength vs. auto cyclicality; trim shorts if CPI falls and Fed signals rate cuts within 90 days.
• Reduce bank exposure to auto‑loan risk: cut BAC weight by 50% (or 1–2% of portfolio) if quarterly auto‑ABS 30+‑day delinquencies rise >100bps QoQ; redeploy into BRK.B or high‑quality IG bonds duration 3–7 years until credit metrics stabilize.
• Small contrarian long: allocate a tactical 0.5–1% position in KMX with buy limit at $28 and a 12–18 month horizon, contingent on Manheim 3‑month trend turning positive (>3%) or Fed rate cut within 6–9 months; use a protective stop at $22.