For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"My top conservative stock idea for 2008 is CarMax (NYSE: KMX)," says Paul Tracy, editor of StreetAuthority Market Advisor.
Warren Buffett's Berkshire Hathaway has recently disclosed that is has taken a 6.4% stake in the used-car retailer. It's impossible to know for sure if Berkshire's stake is the result of Buffett's own buying or that of one of Berkshire's subsidiary companies, but either way it's a vote of confidence for CarMax.
"KMX has been sliding in recent months due to fears that a consumer slump would impact sales of used cars. But we continue to believe those concerns are overblown.
"The company offers a unique shopping experience that is unrivaled by traditional used-car dealerships -- the firm's superstores are well-stocked, offer haggle-free pricing, and provide painless trade-ins and vehicle financing.
"The used car business is highly fragmented in the US, so CarMax has room to grow simply by taking market share from smaller operators that offer less attractive services. With this in mind, we believe KMX can remain resilient in the face of a consumer slowdown.
"KMX trades at less than 20 times next year's earnings, and the company has a projected long-term growth rate of +8%. KMX is on a great long-term growth track, and the stock should have a nice tailwind thanks to Buffett's recent purchase.
"In my view, the current price represents outstanding value for a proven, fast-growing leader like CarMax, and we think this recent pullback presents an attractive buying opportunity."
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