Recurve Capital, an investment management company, released its second-quarter 2025 investor letter. Recurve had a strong second quarter. A copy of the letter can be downloaded here. In Q2 2025, the fund returned +31% gross compared to +10.6% returns for the S&P 500 and 17.8% returns for the Nasdaq. YTD, the fund returned +14.8% gross and +12% net. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025. In its second-quarter 2025 investor letter, Recurve Capital highlight ...

Group 1 - Sands Capital Select Growth Strategy reported a strong quarterly performance with a return of 27.7% in Q2 2025, significantly outperforming the Russell 1000 Growth Index, which gained 17.8% [1] - The positive performance was attributed to factors such as muted inflation, strong corporate earnings, and improving sentiment around artificial intelligence and global trade [1] - The investor letter highlighted Carvana Co. (NYSE:CVNA) as a key stock, which has seen a one-month return of 1.62% and a remarkable 138.95% increase in value over the last 52 weeks, closing at $365.35 per share with a market capitalization of $42.727 billion on September 15, 2025 [2][3] Group 2 - Sands Capital Select Growth Strategy initiated positions in Carvana Co. (NYSE:CVNA) and Arthur J. Gallagher (AJG), indicating confidence in Carvana's ability to gain market share in the fragmented used-car market [3]

Core Insights - Optimist Fund achieved its strongest investment performance since inception, returning 39.2% in Q2 2025 compared to a benchmark return of 11.3% [1] - The fund focuses on investing in underappreciated, market-leading businesses led by ambitious CEOs with significant growth potential [1] Company Highlights: Carvana Co. (NYSE:CVNA) - Carvana Co. reported a 46% growth in retail units and a 38% increase in revenue, achieving an all-time high adjusted EBITDA margin of 11.5% [3] - The company has set a long-term target of 3 million annual retail units at a 13.5% EBITDA margin within 5-10 years, indicating a potential for over 40% annualized unit growth [3] - Carvana's stock closed at $365.35 on September 15, 2025, with a market capitalization of $42.727 billion, and has seen a 138.95% increase in value over the last 52 weeks [2][3] Investment Sentiment - Despite Carvana's strong performance, it is not among the 30 most popular stocks among hedge funds, with 91 hedge fund portfolios holding the stock at the end of Q2 2025 [4] - There is a belief that certain AI stocks may offer greater upside potential and carry less downside risk compared to Carvana [4]

Carvana (CVNA) 2025 Conference Summary Company Overview - Carvana is a leading platform for buying and selling used cars online, with a medium-term goal to sell 3,000,000 cars annually in five to ten years and achieve a 13.5% adjusted EBITDA margin [2][3][24]. Key Financial Performance - In Q2, Carvana set a record by selling over 143,000 retail cars, reflecting a 41% year-over-year growth [3][4]. - The company achieved record profitability metrics, including adjusted EBITDA margin and net income margin, indicating strong operational performance [4][9]. - Carvana's current market share in the U.S. used vehicle market is approximately 1.5%, suggesting significant growth potential [5][19]. Competitive Positioning - Carvana's vertically integrated platform, which includes logistics, delivery, and financing, contributes to its industry-leading growth and profitability [7][8]. - The company has been the most profitable auto retailer by adjusted EBITDA margin for several quarters and recently became the most profitable by GAAP operating profit and net income dollars [9]. Growth Drivers 1. **Customer Experience**: Continuous improvement in customer experience is a key growth driver, exemplified by rapid transaction times [12][13]. 2. **Awareness and Trust**: Carvana aims to increase awareness and trust in e-commerce automotive retail, which currently has low penetration compared to other retail sectors [13][14]. 3. **Inventory Selection**: Expanding inventory selection is crucial for meeting customer demand and improving delivery times [15][37]. Strategic Initiatives - Carvana acquired ADESA, a nationwide physical auction with 56 locations, to enhance its inventory and logistics capabilities [16][60]. - Integration of ADESA locations has reduced average inbound transport distance by about 20% year-over-year and outbound transport distance by 10% [17]. Operational Efficiency - Carvana's operations expense is approximately $15.50 per car, with opportunities to lower variable costs through AI and improved logistics [52][54]. - The company is focused on leveraging its growing data set to optimize inventory selection and operational efficiency [39]. Advertising and Brand Strategy - Carvana plans to invest in brand advertising to build awareness and trust, with positive historical results from such investments [33][34]. - The company is optimistic about using AI to enhance the efficiency of brand advertising campaigns [34]. Financing and Underwriting - Carvana's finance attach rate reached around 85-86%, driven by its integrated financing platform, which enhances customer experience [40][41]. - The company emphasizes the advantages of its vertically integrated financing model over traditional indirect lending, which helps maintain high volume and favorable credit outcomes [46][49]. Future Outlook - Carvana aims to continue investing in its business, particularly in integrating ADESA locations and expanding inventory selection [67]. - The company has plans for selective deleveraging and refinancing opportunities as it improves its capital structure [68]. Conclusion - Carvana is well-positioned for continued growth with strong financial performance, a unique competitive advantage through vertical integration, and a clear strategy focused on enhancing customer experience and expanding market share [19][24].

Group 1 - Carvana Co. operates the leading ecommerce platform for buying and selling used cars in the US, leveraging significant efficiencies from nationwide scale [1] - The company has amassed significant scale, which contributes to its operational efficiencies [1] Group 2 - The investment philosophy focuses on identifying mispriced securities by understanding the drivers behind a company's financials, often revealed through a DCF model valuation [1] - This methodology allows for a flexible approach to investing, considering all prospects of a stock to determine risk-to-reward [1]