1. Ally Financial Inc. (NYSE:ALLY)
Expected Earnings Growth 2024: 1.60%
Latest P/E Ratio: 6.77
Warren Buffett’s Q2 2024 Stake: $1.15 Billion
Number of Hedge Fund Investors as of Q2 2024: 45
Ally Financial Inc. (NYSE:ALLY) is one of the best value stocks to invest in, according to Warren Buffett, operating as a financial services company. It offers digital financial products and services, including retail installment sales contracts, loans, operating leases, and term loans to dealers.
The chief financial officer reiterated that consumers were struggling with inflation amid the high interest rate environment. Likewise, most of the bank’s customers were struggling with credit challenges.
However, with inflation ticking lower, closer to the recommended 2%, and the Federal Reserve cutting interest rates, liquidity levels are poised to receive a significant boost. Consequently, Ally Financial Inc. (NYSE:ALLY) outlook is looking increasingly positive.
Ally Financial Inc. (NYSE:ALLY) strives to shake up the banking industry by launching a digital-only bank that promises to provide customers with steady, high interest rates on their deposits. It has fulfilled this commitment and done exceptionally well over the last ten years, holding $142 billion in retail deposits.
It regularly offers better interest rates on savings accounts than the major banks, so it attracts customers from big names like Bank of America. Ally Financial Inc. (NYSE:ALLY) returns 4.2% in interest annually to its customers to keep their money with it.
When the Federal Reserve reduces the cost of borrowing, it benefits Ally Financial Inc. (NYSE:ALLY) in its consumer banking sector. Reduced borrowing costs allow the company to provide consumers with lower interest rates on car loans. This will assist consumers in affording vehicles and increase the probability of loan repayment in full. Ally has noted a rise in car loan defaults in the latest quarters, which could negatively impact earnings. It aims to mitigate the risk that this issue intensifies by lowering interest rates.
Consequently, Ally Financial Inc. (NYSE:ALLY) is a bargain as the Federal Reserve continues to cut interest rates. While trading with a price-to-earnings multiple of 6.77, it offers a dividend yield of 3.53%.
At the end of Q2 2024, 45 hedge funds tracked by Insider Monkey held stakes in Ally Financial Inc. (NYSE:ALLY), down from 47 in the previous quarter. These stakes have a total value of over $2.36 billion. With 29 million shares, Berkshire Hathaway was the company’s leading stakeholder in Q2.
The best value stocks to invest in, according to Warren Buffett, are companies trading at great discounts and well poised to generate long-term value. However, given that the artificial intelligence arms race is just but starting, there are under-the-radar AI stocks trading at highly discounted valuations that hold greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than ALLY, check out our report about the cheapest AI stock.
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