Please ensure Javascript is enabled for purposes of website accessibility

1 Big Fintech Stock at Bargain Prices with Generous Returns

By Matthew Frankel, CFP® and Jason Hall - Jun 26, 2022 at 11:38AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's why investors shouldn't overlook Ally Financial.

With its cheap valuation and high returns, Ally (ALLY 5.76%) is a strong value play for the long haul. In this clip from "The Future of Fintech" on Motley Fool Live, recorded on June 16, Motley Fool contributors Matt Frankel and Jason Hall discuss why Ally is a strong pick given its bargain price.

Matt Frankel: Ally, if you're not familiar, came from GE Capital. They were the evolution from GMAC.

Lou Whiteman: GM, yeah.

Frankel: I'm sorry. GMAC financial, they used to be a part of General Motors (GM 3.63%). It shouldn't be a big surprise of their primary loan portfolio is auto lending. They also have a lot of mortgages on their balance sheet. They have some other types of loans, personal loans, things like that. They have a big deposit platform. They have an investment platform. Ally Invest has both a brokerage and a robo-advisory platform that is one of the highest rated at our sister site, the Ascent. I know because I'm the one who did the write up on it. It's a very impressive company so far. Very cheap valuation. Very high returns on capital. That's why I ranked it high. It's very high on my watchlist right now. I don't own it yet. I think it's an absolute bargain at the current prices. Guys?

Jason Hall: I spout some numbers out here. One in 10, those are the assets and return on equity for these businesses that we look at, 1.6% and 20% trailing metrics. Very strong returns. Trades for about 20% discount to book value, about 0.8 times book value and four times trailing earnings. In this group, it is the deep value play. It is a discount to the value of its assets and it generates really high returns. That is a wonderful combination to make money. Again, to lend, there's risk. Short-term risks, cyclical risk, and also leverage risks, if we see higher defaults, particularly on that auto loan platform. If the economy does get hit hard, could be some struggles temporarily. But again, I think just like Bank of America (BAC 3.39%), that if you own this thing for multiple years, you're going to do very well.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Ally is an advertising partner of The Ascent, a Motley Fool company. Jason Hall has no position in any of the stocks mentioned. Lou Whiteman has no position in any of the stocks mentioned. Matthew Frankel, CFP® has positions in Bank of America and General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ally Financial Stock Quote
Ally Financial
$34.86 (5.76%) $1.90
Bank of America Corporation Stock Quote
Bank of America Corporation
$35.07 (3.39%) $1.15
General Motors Company Stock Quote
General Motors Company
$37.95 (3.63%) $1.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.