5 Most Undervalued Value Stocks To Buy Now

3. Ally Financial Inc. (NYSE:ALLY)

PE Ratio as of October 21 (TTM): 3.77 

Number of Hedge Fund Holders: 42

Ally Financial Inc. (NYSE:ALLY) is a leading financial services company that offers a variety of financial products and services to consumers, businesses, and automotive dealers. At the end of Q2 2022, 42 hedge funds disclosed ownership of stakes in Ally Financial Inc. (NYSE:ALLY). The collective stakes of these hedge funds amounted to $2.32 billion.

This October, RBC Capital analyst Jon Arfstrom revised his price target on Ally Financial Inc. (NYSE:ALLY) to $32 from $37 and reiterated an Outperform rating on the shares. On October 20, Citi analyst Arren Cyganovich revised his price target on Ally Financial Inc. (NYSE:ALLY) to $34 from $35 and maintained a Buy rating on the shares.

Ally Financial Inc. (NYSE:ALLY) has a trailing twelve-month operating margin of 34.32% and has free cash flows of $1.99 billion. As of October 21, Ally Financial Inc. (NYSE:ALLY) is trading at a PE multiple of 3x and is offering a forward dividend yield of 4.54%. The stock is one of the best undervalued stocks to buy right now.

As of September 30, Magnolia Capital Fund is the most prominent investor in Ally Financial Inc. (NYSE:ALLY) and has stakes worth $86.6 million in the company.

Here is what Moon Capital Management had to say about Ally Financial Inc. (NYSE:ALLY) in its third-quarter 2022 investor letter:

“We recently purchased shares of Ally Financial Inc. (NYSE:ALLY), the world’s largest digital-only bank. Ally’s legacy dates back more than 100 years when it was originally launched as GMAC, the in-house financing arm of General Motors. The company was spun out from GM and rebranded as Ally more than a decade ago, but has retained an automotive focus on the lending side, where it holds the largest position in prime auto lending.

Since the spinoff, Ally has transformed from an auto loan company into a comprehensive, independent finance provider for borrowers and savers of all types. The company has completely restructured the liability side of its balance sheet and has created a deposit-gathering engine that is now more than 85 percent deposit[1]funded. (Compared to issuing traditional corporate debt, deposits are a significantly less expensive capital source for banks.)

Due to the lower overhead associated with the digital bank’s lack of brick-and-mortar locations, the bank produces one of the best efficiency ratios in the industry. This low-cost position, combined with a relatively high loan portfolio yield of approximately 6.75 percent, has helped the company earn net interest margins well above those of many leading banks. These high margins translate into high returns on equity, which the company targets at 16-18 percent over the medium term. (Actual ROE in 2021 was 24 percent. When the company came public in 2014, its ROE was a paltry four percent.)..” (Click here to read the full text)