William Nash, President and CEO at Carmax (KMX), recently added 8,220 shares. The buy increased his holdings by just over 5 percent, and came to a total cost of $501,256.
This is the first insider activity at the company since July. It’s also the first insider buy at the company over the past two years. Overall, company executives have been regular sellers of shares following the exercise of stock options.
All told, company insiders own 0.3 percent of shares.
The used car dealership is down 48 percent over the past year, as sales have slowed. That’s led to an 86 percent drop in earnings and revenues are down by 22 percent.
Carmax also has a high level of debt, with roughly $2 in debt for every $1 in equity, a situation that could worsen as the share price falls.
Action to take: Investors may want to stay away from the company for now, as the slowing economy will likely continue to fare poorly for used car sales. It’s likely shares will retest their prior lows near $52 per share.
Traders can likely benefit from the long-term downtrend in shares. The April $50 puts, last going for about $4.50, can likely deliver mid-double-digit returns in the coming months on another downward shift in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.