Copart’s (CPRT) Financials Show Resilience; Leadership Changes Highlight Stability

In the second quarter of 2026, the U.S. stock market indices experienced their strongest performance since 2020, largely fueled by a handful of Artificial Intelligence-related stocks. Investors' attention has been drawn to potential beneficiaries of AI, reminiscent of the late 1990s internet bubble. The Madison Large Cap Fund (class I) delivered an 8.4% return in Q2 2026, trailing the S&P 500 Index's 15.2% increase. The market's current narrowness is a cause for concern, suggesting that this trend may not endure.

Despite the transformative impact of AI on society and the economy, the recent successes of market leaders may not be permanent, and market cycles could still cause booms and busts. Factors such as a volatile federal administration, rising budget deficits, inflation, high interest rates, and strained consumer finances will significantly shape the economy and stock market in the future.

Madison Large Cap Fund highlighted Copart, Inc. (NASDAQ:CPRT) in its Q2 2026 investor letter. The online auction and vehicle remarketing services company posted a one-month return of 24.10% as of August 19, 2026, but its shares declined 29.21% over the past 52 weeks. Copart, Inc. has a market capitalization of $31.26 billion. The fund's review of the company's top five holdings could help identify its best picks for 2026.

The report notes that volume growth at Copart, Inc. has been weak due to more under-and-uninsured auto drivers and shifting market share among insurance carriers. However, the company's earnings have grown at a healthy pace over the past few years, and its competitive position remains robust. Notably, Copart, Inc.'s Executive Chairman, Jay Adair, who previously served as CEO for many years, has returned to his role, which the fund views as a positive development due to Adair's extensive experience and substantial ownership stake.

Copart, Inc. (NASDAQ:CPRT) is not among the fund's list of the 40 most popular stocks among hedge funds heading into 2026. The number of hedge fund portfolios holding Copart, Inc. dropped from 68 to 57 between the first and second quarters of 2026. However, Copart, Inc.'s consolidated revenue grew to $1.24 billion in Q3 FY 2026, up 2.1% from the previous year, driven by strong service and purchase vehicle sales.

While the fund acknowledges the potential of Copart, Inc. as an investment, it believes certain AI stocks offer greater upside potential and carry less downside risk. The report suggests that investors seeking an extremely undervalued AI stock that may benefit from Trump-era tariffs and the onshoring trend should consider a free report on the best short-term AI stock.