Stock Entry Point Article

Carmax, Inc 1

The auto industry is undergoing a transformation. The climate goals of various countries are leading car makers to shift towards electric vehicles. The auto sector, in general, was going through a difficult phase due to softer demand. The pandemic caused further disruption as production lines around the world came under lockdown restrictions.

Amidst the uncertainty, companies like Carmax and Tesla have been among the best auto stocks to buy based on price performance. Tesla has gained a staggering 338% since the start of the year and 422% since the March market fall. Carmax, on the other hand, is up 19% since the start of the year and 140% up from its March lows.

The pandemic has given a boost to companies that have an online presence. Carmax, for example, is one of the top auto related stocks to buy because it had been working on a plan for boosting its online presence even before the pandemic began. Carmax has invested $300 million to augment its 200 physical stores with a digital platform. It also launched the contactless curbside pickup while the pandemic raged throughout the world. Such contactless pickups are popular with online car buyers. Tesla has also been selling its cars online.

The investment to build a credible online presence is significant and will act as a barrier for many of the smaller auto retail chains. According to Carmax Chief Marketing Officer Jim Lyski, “I think the largest players are the only ones that can actually afford to build that capability.”

Meanwhile, Oregon-based Lithia Motors has been one of the best auto and truck dealership stocks this year. It has gone up by 331% since hitting a low in March 2020.

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