Investing gurus were all atwitter earlier this month, when it was revealed that Warren Buffett had purchased a 6.4% stake in Motley Fool Inside Value recommendation CarMax (NYSE: KMX). Fools like me, seeing that the Oracle of Omaha had bought in right around my own purchase price, found that gratifying.
And interesting, because it sets up the subject of today's mini-column.
According to a report just out on Reuters, the man often heralded as "the next Warren Buffett" just upped his stake in one of CarMax's biggest competitors. That's right: In addition to owning sizeable stakes in Citigroup (NYSE: C), Home Depot (NYSE: HD), and, of course, Sears Holdings (Nasdaq: SHLD), Eddie Lampert now owns a whopping 30% of AutoNation (NYSE: AN).
Who's smarter?
Which raises the question: Which of these two titans of the investing world is placing the smarter bet? (And another: If these two certifiable geniuses are both focused on the car dealers, how off his rocker must Kirk Kerkorian have been to be wasting time on car makers GM (NYSE: GM) and Nissan (Nasdaq: NSANY) last year?)
Taking a quick side-by-side view of Buffett's and Lampert's targets, here's what I see:
|
P/E
|
Growth Rate
|
PEG
|
Recent Growth*
|
|
CarMax
|
23
|
18%
|
1.2
|
10%
|
|
AutoNation
|
11
|
10%
|
1.1
|
(5%)
|
*Year-over-year sales growth for the most recent quarter.
I have to admit that, biased as I am in favor of CarMax, I set out on this column with the expectation that I'd find Buffett the hands-down winner. But looking at the numbers, it's actually a much closer call. From a PEG perspective, AutoNation actually looks to be a better buy than CarMax -- even if the pair's recent performance suggests that CarMax is winning the market-share race against its larger rival. AutoNation also has the edge on price when evaluated on price-to-book value, price-to-sales, and that favorite metric of buyout artists, enterprise value-to-EBITDA.
Reluctant as I am to admit it, Eddie Lampert might -- just might -- be making the smarter car play here. But hey, if the runner-up prize in this race is finding yourself riding shotgun with Warren Buffett, I think I can live with my "mistake" of having bought CarMax instead of AutoNation.
Check out the recent performance of these companies:
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