CarMax: Random thoughts... Running thread

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#1

Manheim publishes the sales trends and maintains an index. Below is the latest quarter presentation.

here is the used vehicle Index

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So you are looking for another one to two quarters of falling prices. As the falling prices flows through the inventory, sales, in another 2 to 3 quarter things will normalize from the inventory and sales point of view. I don’t know what is the lag for the default rates to show up from sales, I would like to see the default rates of cohorts from Jun 2021 with 2018, 2018 or prior period to see how the price impacts default rates and if we can overlay economic condition on top of that, would be awesome.

Ignoring the default rates, KMX stock should be forming bottom soon.

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#2

I didn’t get to look into the earnings, from headline the EPS miss is pretty bad. I guess this was expected in the last week or so, because suddenly option premium were raising, showing a bigger move is expected out of earnings. I have sold some Jan 23 $40 Puts, and I will be closing them today, take the profit move to sidelines and wait. The used car prices started to fall, but we still have some ways to go to get back to normal levels. I think the bottom for KMX should be very close, may be another 1 or 2 quarters.