CarMax, Inc.
Thesis
CarMax has a unique business model for selling used cars that has proven difficult for competitors to replicate. The company is only halfway built out across the U.S., presenting a significant opportunity for growth by potentially doubling its store base. When purchased, CarMax was trading at 15 times earnings, below the market average of 17-18 times, while also showing healthy same-store sales growth.
Did it work?
The long thesis in CarMax played out decisively: over the ~10.6 years since the pitch the stock returned +314.1% (roughly 14% annualized), more than quadrupling. The core thesis elements — a differentiated used-car retail model, a long runway to roughly double the store base, and a below-market entry multiple of 15x earnings — were validated as CarMax expanded its footprint and compounded earnings, driving the share price well beyond the market's average return over the period. With far more than the implied multi-year buildout horizon elapsed and the return strongly positive, there is little ambiguity.