In this article we will take a look at whether hedge funds think Ally Financial Inc (NYSE:ALLY) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is ALLY stock a buy or sell? Ally Financial Inc (NYSE:ALLY) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Ally Financial Inc (NYSE:ALLY) was in 57 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 57. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 53 hedge funds in our database with ALLY holdings at the end of September. Our calculations also showed that ALLY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Howard Marks of Oaktree Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). Now we’re going to take a gander at the fresh hedge fund action surrounding Ally Financial Inc (NYSE:ALLY).
Do Hedge Funds Think ALLY Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. By comparison, 54 hedge funds held shares or bullish call options in ALLY a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Oaktree Capital Management was the largest shareholder of Ally Financial Inc (NYSE:ALLY), with a stake worth $500.2 million reported as of the end of December. Trailing Oaktree Capital Management was Arrowstreet Capital, which amassed a stake valued at $271 million. Platinum Asset Management, Magnolia Capital Fund, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Punch Card Capital allocated the biggest weight to Ally Financial Inc (NYSE:ALLY), around 39.11% of its 13F portfolio. Magnolia Capital Fund is also relatively very bullish on the stock, dishing out 23.61 percent of its 13F equity portfolio to ALLY.
As one would reasonably expect, key money managers were leading the bulls’ herd. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the most outsized position in Ally Financial Inc (NYSE:ALLY). Senator Investment Group had $48.1 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also initiated a $24.6 million position during the quarter. The other funds with new positions in the stock are Gregg Moskowitz’s Interval Partners, James Dinan’s York Capital Management, and Allon Hellmann’s Full18 Capital.
Let’s now review hedge fund activity in other stocks similar to Ally Financial Inc (NYSE:ALLY). We will take a look at C3.ai, Inc. (NYSE:AI), WPP Plc (NASDAQ:WPP), The J.M. Smucker Company (NYSE:SJM), James Hardie Industries plc (NYSE:JHX), DaVita Inc (NYSE:DVA), Raymond James Financial, Inc. (NYSE:RJF), and Packaging Corporation Of America (NYSE:PKG). This group of stocks’ market valuations resemble ALLY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AI | 37 | 483532 | 37 |
| WPP | 6 | 37552 | -1 |
| SJM | 34 | 580428 | 3 |
| JHX | 4 | 11803 | 0 |
| DVA | 32 | 4814258 | -2 |
| RJF | 34 | 580848 | 6 |
| PKG | 16 | 128753 | -7 |
| Average | 23.3 | 948168 | 5.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. That figure was $2594 million in ALLY’s case. C3.ai, Inc. (NYSE:AI) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Ally Financial Inc (NYSE:ALLY) is more popular among hedge funds. Our overall hedge fund sentiment score for ALLY is 89. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on ALLY as the stock returned 27.4% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
