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Hype Asset of the Day | January, 31th, 2022



Ally Financial Inc. (NYSE: ALLY)

Ally Financial is a bank holding company with its headquarters in Detroit, Michigan. It provides various digital financial products and services to customers, both corporate and commercial, residing primarily in Canada and the USA. It has 4 main divisions: Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations. Having made its way to the Berkshire Hathaway portfolio last year and continuing to do well, mentions of Ally Financial have increased by a huge margin of 130% over the last day, encouraging investors to look into what makes this stock such a good investment. Ally Financial Inc. currently trades at $31.28 per share.


Positive Hype

There are lots of reasons you should add Ally Financial to your portfolio, here are some of the major ones.


  • Thanks to stronger-than-expected 2022 fourth-quarter financial results and a lower-than-expected loan default rate for the three-month period, the bank's shares have moved higher by an impressive 33% so far this year.


  • Ally's retail auto loans at the end of the fourth quarter of 2022 almost reached $84 billion, which is up by more than $11 billion since the end of 2019.


  • Quarterly originations peaked at more than $13 billion in the second quarter of 2022, which is up significantly from the $9.7 billion of originations Ally peaked at in the second quarter of 2019.


  • The financial services company's dividend yield of 3.67% narrowly edges out HP to make the list of the multibillionaire's top five dividend stocks.


  • Ally's average new auto loan had a 9.57% yield and its average cost of funds in 2022 was just 1.71% (mostly consumer deposits).


  • Its net interest margin is one of the highest in the banking business, while a 12% discount to its book value makes Ally stock a promising long-term investment.


  • Ally's shares are trading at a bargain-basement price-to-earnings ratio of 6.58 at the time of this writing.


  • Wall Street expects the bank to deliver solid top-line growth next year, with a 7.4% rise in annual revenue relative to 2023.




Negative Hype

Although there are lots of reasons Ally might be a good investment, it is just as important to see why it might not be as well. Some of the reasons it might not be the best time to invest in Ally right now are as follows.



  • There is still the fear that consumers will fall behind on their auto loans, which will affect the company’s financials drastically. Investors are particularly concerned about how its retail auto loan portfolio might perform as used car prices start to normalize after exploding due to the chip shortage caused by the pandemic.


  • The bank, in fact, lost a staggering 48% of its value over the balance of 2022.

Conclusion

All told, Ally stock seems poised to continue its rebound following a forgettable 2022. Overall, Ally Financial is a leader in its industry and a combination of having a cheap valuation, solid financials and relatively high returns to shareholders make it seem like a good choice of investment. However, given its performance over the last year, and continuing concerns of potential investors with regard to the repayment of auto loans.


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