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Strategies & Market Trends : Value Investing
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To: Spekulatius who wrote (53735)4/12/2014 11:52:12 AM
From: Spekulatius1 Recommendation

Recommended By
Mattyice

  Read Replies (2) of 78717
 
ALLY @23.9$. I bought some shares in this car financier. The stock is going for about tangible book and the restructuring is not 100% complete (there are still about 8B$ in Resmark mortgage assets to runoff), but I think this has good potential. I should be noted that it was the Resmark mortgage business that did them in and forced them into bankruptcy. They are exciting this business and 80% us gone and the remainder seems well reserved. Besides that car financing, they have now a very well respected internet bank that grew from 10B$ in deposit to ~53B$$ from 2008 until know. This provides a stable funding base for their lending business.

I like what management has done in the last few years. Earnings should improve as interest rates move higher (improving NIM) and expensive financing liabilities run off over time. I think the bad IPO timing provides and opportunity to get into this stock cheaper than we otherwise would have. My only concern is a growing subprime segment in the car financing market. It is about 10% of ALLY business, but there are players who go whole hog, because it currently is insanely profitable, with double digit NIM and very low default rates. These subprime car lenders go for for 2-4x tangible equity (examples CACC , CPSS and SC). I think this risk is contained for ALLY, but needs to be watched ( and could be hedged out by shorting CACC).
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