Ally Financial (ALLY), mcap=$9bn, price $29.25 vs $33.20

$ALLY pitch:
– Online-only bank/insurer of the auto industry, funding operations with low-cost sticky deposits.
– Trades at 1.1xTBV and single-digit earnings despite management guiding to 16-18% ROTCE.
– Mgmt guidance already takes into account material reduction in used vehicle values.
– 33% of shares repurchased since 2016, with 11% of the current mcap repurchased YTD.
– $BRK owns 10% of the company and Norbert Lou has ALLY as a core position.

$ALLY valuation:
– Trades at single-digit earnings and 1x TBV with mid-teens ROTCE.
– Even with FED’s severally adverse risk scenario and assuming $1.4bn of losses, ALLY would still sit at 1.2x TBV.

Exp. gain: Not specified.

Full ALLY write-up (free guest account required):

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