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

Makaira Partners disclosed in a 13F filing that it fully divested its CarMax (KMX) stake in Q3, selling 272,203 shares valued at roughly $18.29 million based on average quarterly pricing; the position no longer appeared in its portfolio as of Sept. 30. The sale was part of a broader fund downsizing that reduced reportable AUM by about 41% quarter‑over‑quarter and left concentrated top holdings (Charter ~$45.1M, Bath & Body Works ~$35.3M, Lamar ~$20.8M, Flutter ~$20.7M, Domino's ~$16.0M). Relevant CarMax metrics: TTM revenue $26.4B, TTM net income $521.1M, market cap ~$5.1B and share price $34.43 (close Nov. 14, 2025); the manager cited a challenging quarter at the auto retailer as context for the exit.

Analysis

Market structure: Makaira’s $18.3M sell of KMX (≈0.36% of KMX market cap, AUM down 41%) is a sentiment signal more than a liquidity shock; direct winners are competing stable cash-flow names (DPZ, BBWI, LAMR) while short‑cycle auto retailers and captive finance (KMX, Carvana peers) are losers. Competitive dynamics favor scale players with integrated finance and online channels if used‑car prices normalize; CarMax’s size (TTM revenue $26.4B, market cap $5.1B, P/S ≈0.19, P/E ≈9.8) gives price-setting power but also exposure to credit and wholesale price swings.

Risk assessment: Near term (days–weeks) watch forced selling and options gamma around earnings; short term (1–6 months) key risks are a 5–10% drop in Manheim/IAA indices causing inventory markdowns and rising delinquency in CarMax Auto Finance, and long term (12+ months) recession-driven demand collapse or regulatory curbs on financing that could compress earnings >30%. Hidden dependencies: KMX profitability depends on wholesale price spreads, floorplan financing costs tied to short‑term rates, and ABS funding market liquidity; catalysts include next quarterly earnings (30–45 days), FOMC rate moves, and monthly Manheim index prints.

Trade implications: Use size‑controlled bearish exposure to KMX—prefer option spreads to limit capital and tail risk—pair with long exposure to resilient consumer names (DPZ, BBWI) or transit‑ad recovery (LAMR) that Makaira favors. Cross‑asset effects: widening auto ABS spreads or higher credit cost would pressure regionals and BBB consumer credit, so hedge with IG credit protection if taking larger directional equity bets.

Contrarian angles: The market may overstate one small fund’s sale; a rational entry point could appear if KMX trades >15% below current price on worsening Manheim prints, creating value given low P/S and manageable leverage. Historical parallel: 2021–22 used‑car normalization delivered sharp but temporary markdowns then stabilization; if wholesale spreads stabilize, KMX upside recovery of 20–30% is plausible over 6–12 months, so cap‑weighted option strategies or staged entries are preferable to all‑in shorts.

Key Decisions for Investors

• Establish a size‑controlled bearish position on KMX: buy a 3‑month put spread (long 30 / short 35) sized to 2% portfolio risk with target exit at $28 (≈‑19%) within 3–6 months and hard stop if KMX closes above $38 for 5 consecutive trading days.
• Implement a pair trade: long DPZ 1.5% portfolio weight vs short KMX 1.5% (equal dollar) over 3–6 months; thesis: DPZ stable cash flow + pricing power vs KMX cyclicality—take profits if spread widens ≥15% or after DPZ reports two consecutive revenue beats.
• Add a tactical long in LAMR (1–2% weight) for ad recovery exposure; target +20% in 6–12 months, stop‑loss at ‑12%; increases if Q4 ad revenues sequentially improve >5%.
• Trigger rules to scale exposure: if Manheim Used Vehicle Value Index falls >5% MoM or CarMax EPS misses by >10% on next print, increase bearish exposure by 50%; if Manheim stabilizes (0–2% MoM change) and ABS spreads tighten 25 bps, reduce shorts by 50% and consider covered-call selling against KMX/long positions.