Giverny Capital Exits Longtime Stake in CarMax, Shifts Focus Amid Market's AI Frenzy
In a notable portfolio shift, Giverny Capital Asset Management has closed out its long-term investment in CarMax, Inc. (KMX), according to the firm's recently released fourth-quarter 2025 letter to investors. The move punctuates a challenging year for the value-oriented manager, which saw its portfolio return a mere 0.01% in Q4 against the S&P 500's 2.66% gain.
The letter outlined a persistent headwind: a market overwhelmingly focused on artificial intelligence investments, which has left many fundamentally sound companies—like those in Giverny's portfolio that are posting solid earnings growth—in the shadows. "While our companies excel in execution, the market's narrative is currently singular," the letter noted, referencing the firm's underweight position in mega-cap tech.
CarMax, the nation's largest used vehicle retailer, saw its shares plummet nearly 47% over the past year, despite a recent one-month rally of over 15%. The company reported a 6.9% year-over-year decline in Q3 fiscal 2026 sales to $5.8 billion, citing lower unit volume. Giverny's exit signals a loss of patience with the sector's cyclical pressures and financing challenges, opting to reallocate capital elsewhere.
"We recognize CarMax's quality and long-term potential," the firm stated, "but we see a more compelling risk/reward profile in select opportunities within the technology ecosystem." The letter subtly pointed investors toward alternative ideas, including AI-related stocks believed to have significant short-term catalysts.
The decision reflects a broader trend of active managers grappling with a narrow market leadership. With only 54 hedge funds holding CarMax at the end of Q3 2025—a number unchanged from the prior quarter—institutional interest appears stagnant, potentially validating Giverny's tactical retreat.
Investor Reactions
Eleanor Vance, Portfolio Manager at Steadfast Advisors: "Giverny is making a prudent, if painful, choice. The used car market is facing structural headwinds from high interest rates and shifting consumer preferences. Redeploying that capital into areas with clearer secular tailwinds is just disciplined portfolio management."
Marcus Thorne, Independent Market Analyst: "This is classic performance-chasing disguised as strategy. Dumping a solid company at a 52-week low after a 47% drop to chase AI hype? This reeks of desperation to catch up to the index, not a conviction-driven move. They're locking in a loss and potentially buying the tech top."
David Chen, CFA, of Chen Wealth Management: "The exit is a data point, not the whole story. Giverny's overall underperformance highlights the difficulty of running a concentrated, non-consensus portfolio in this market. Their CarMax call may prove right or wrong, but the real test is whether their new picks can close the performance gap."
Rebecca Shaw, Retail Investor & Finance Blogger: "It's incredibly frustrating as a longtime follower. They preached holding wonderful businesses through cycles, but now they're selling a leader at its lows because it's not shiny and AI-themed. It feels like a betrayal of their own philosophy for short-term pressure."
Disclosure: This analysis is based on public investor communications. For more insights, review our curated page of Q4 2025 Hedge Fund Letters.