Q. Please give me your appraisal of CarMax Inc. stock. — V.M., via the Internet

A. The stock of the nation's largest used-car retailer has been in high gear, though the company can't avoid the stress of recession.

It had an earnings jump of 72 percent in its fiscal fourth quarter, ended February 28, mostly because of a large charge that it took for loan adjustments a year earlier.

In addition, CarMax (KMX) stock is up 54 percent this year, following last year's 60 percent decline, a 26 percent drop in 2007 and a 94 percent increase in 2006.

CarMax sells vehicles through about 100 retail stores in 46 markets with a no-haggle pricing policy. It is well-positioned to increase market share. About half of its stores are fewer than five years old, with sales expected to improve the longer they are established in their communities.

Used cars represent about 80 percent of CarMax revenues and new cars five percent, while the remainder includes wholesale, financing and repair. No competitor has successfully replicated its business model.

Although the used-vehicle market isn't quite as cyclical as the market for new vehicles, CarMax has suffered the current recessionary problems that have reduced consumer spending and affected all car sales. Its net sales were down 28 percent in the fiscal fourth quarter because of leaner inventories and fewer sales through its finance unit.

The consensus Wall Street analyst opinion on CarMax stock is "hold", according to Thomson Reuters, consisting of one "buy", 10 "holds", one "underperform" and one "sell".

CarMax, launched in 1993 as part of the now-defunct Circuit City and then spun off as an independent firm in 2002, has gone all-out to reduce its cost of doing business. Among other things, it has cut its work force and halted its rapid expansion, while reducing capital spending in fiscal 2010 to $20 million from $186 million a year earlier.

Thomas Folliard, who has been at CarMax in a number of different positions since its inception, has been president and chief executive since 2006.

CarMax earnings are expected to decline 11 percent in the fiscal year ending next February and rise 113 percent the following fiscal year. The projected five-year annualised return of 16 percent compares to 12 percent expected for its peers.

The firm recently announced an "e-mail alert" feature on carmax.com that allows customers to receive e-mails when specific vehicles they're searching become available in the CarMax inventory. With inventory updated a number of times daily, the consumers receive the notifications immediately.

Q. I have heard about the Vanguard Explorer Fund but would like to know how it operates. — N.C., via the Internet

A. Based on the concept of "the more, the merrier," the giant fund has a lot going on.

Last year, it increased to seven the number of independent adviser firms managing its various portfolios. Operating separately, two of these seven portfolio teams use quantitative models while the others do their own fundamental analysis.

Splitting up assets this way has permitted the fund to grow much larger than most small-cap growth funds, which require greater research and more trading activity than large-caps in order to build meaningful positions in each holding.

The $6 billion Vanguard Explorer Fund (VEXPX) is down 35 percent over the past 12 months, with a three-year annualised decline of 15 percent and a five-year annualised decline of four percent. All three of those results rank around the midpoint of small growth funds.

"Vanguard Explorer is an analyst pick in the small-cap growth category because it is low-cost, consistent in style and performance, diversified, and has experienced managers," said Dan Culloton, analyst with Morningstar Inc. in Chicago. "It has been very competitive with its peers over time, though not as volatile."

In theory, having so many advisers means two or three of them may be hitting on all cylinders at one time when the others aren't. This should make it easier for the fund to beat its category's returns over time, but in recent years, the results have been middle-of-the-pack.

"However, the risk you run is that the more managers you add, the more you end up looking like an index fund of the market but are paying the higher fees of active management," Culloton said.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N. Central Ave., Suite 302, Phoenix, AZ 85004-1248, or by e-mail at andrewinv@aol.com.