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.