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GuruFocus Financial Strength Rank measures how strong a company’s financial situation is. It is based on these factors

1. The debt burden that the company has as measured by its Interest coverage (current year).
2. Debt to revenue ratio. The lower, the better
3. Altman Z-score.

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

Financial Strength : 5/10

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GuruFocus Profitability Rank ranks how profitable a company is and how likely the company’s business will stay that way. It is based on these factors:

1. Operating Margin
2. Trend of the Operating Margin (5-year average). The company with an uptrend profit margin has a higher rank.
••3. Consistency of the profitability
4. Piotroski F-Score
5. Predictability Rank•

The maximum rank is 10. A rank of 7 or higher means a higher profitability and may stay that way. A rank of 3 or lower indicates that the company has had trouble to make a profit.

Profitability Rank is not directly related to the Financial Strength Rank. But if a company is consistently profitable, its financial strength will be stronger.

Profitability & Growth : 6/10

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» ALFI's 10-Y Financials

Financials


Revenue & Net Income
Equity & Asset
Oprt. Cash Flow & Free Cash Flow

» Details

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Preferred stocks of Ally Financial Inc

SymbolPriceYieldDescription
ALFI980.007.207 % Perp Pfd Shs Series -G- Reg-S
ALLYPRB0.007.84Fixed to Floating Rate Perp Pfd Shs Series -A-
GMSPZ0.000.007 % Perp Pfd Shs Series -G

Guru Investment Theses on Ally Financial Inc

Daniel Loeb Comments on Ally Financial - Jan 22, 2014

Third Point has invested across the capital structure of Ally Financial (ALFI), the former GMAC, throughout the company's multi-year reorganization. Today's Ally Financial ("Ally") fits the pattern of other profitable investments we have made: a highly successful, nearly-completed restructuring that remains undervalued, with an explosive earnings story led by a talented management team who are economically aligned with shareholders.

We invested initially in 2011 in Ally's unsecured debt and preferred securities because we believed market estimates of potential liabilities related to the company's w holly owned mortgage subsidiary, Rescap, were excessive. When Ally stopped funding its losses through direct loans and sought to distance itself from Rescap 's b allooning potential liabilities in 2012, Rescap filed Chapter 11. After nearly one year of creditor negotiations, Ally permanently settled all mortgage related liabilities for approximately $2 billion, a figure that was consistent with our expectations. During this period, Ally initiated a radical operational restructuring that included divesting all of its international operations and their associated $30 billion of assets and jettisoning Rescap, transforming Ally into a pure-play North American auto finance company with leading market share. 

Under normal conditions, a financial services company with $185 billion in assets undergoing a substantial restructuring would attract significant interest from investors. However, until November 2013, Ally remained 75% owned by the US government, under the terms of the Federal government bailout of General Motors during the financial crisis. With Ally's debt in struments trading above par following Rescap's bankruptcy filing , distressed players moved on to other opportunities and traditional equity investors dismissed the opportunity given the small float. Over the past six months, we have become one of Ally's largest shareholders, acquiring approximately 9.5% of the company in a series of private transactions.

Ally has announced a strategic plan to achieve increased profitability driven by improved cost of funding and balance sheet optimization, reduction in structural costs associated with divested international assets, and the easing of regulatory constraints still remaining due to the legacy Rescap relationship and government ownership. It has already begun reducing its high-cost funding structure through liability management, and recently received upgrades from S&P, Moody's , and Fitch, putting most of its debt instruments within striking distance of investment grade. The $1.3 billion primary capital raise in Q3 has strengthened Ally's capital metrics and should allow for greater future regulatory flexibility, mainly via increased funding from its rapidly growing online bank which has more than $50 billion in deposits. Last week's successful placement reduced the governmen t's holdings to 37 %. Finally, Ally recently received Fed approval for its Financial Holding Company application, a designation that will allow it to keep its competitive advantage of serving as a "one stop shop" for auto dealers providing retail and wholesale financing, insurance, and auction services.

Our confidence in Ally's ability to execute on its ambitious restructuring plan is driven by the leadership of Mike Carpenter, its talented CEO, and the company's deep management bench. In the last 12 months, Mr. Carpenter has guided Ally through one of the largest and fastest restructurings we have witnessed. Divesting $30 billion of assets on four continents and resolving a highly complex bankruptcy of a subsidiary are only the beginning of the story from this team, and we expect them to execute on their multi-year plan to significantly increase All y's earnings. Nearer-term, we believe Ally will be in a position to exit TARP with full government repayment during 2014, most likely through an IPO. Ally's underlying assets are low risk, with normalized credit losses of ~50bps and peak losses during the crisis of only ~100bps. The assets are short duration, typically 2½ to 3 years, resulting in a balance sheet that can quickly benefit from rising rates. These factors have led both debt and equity investors historically to apply low cost of capital requirements to securities backed by auto loans. We believe Ally is poised to grow its capital base and ultimately achieve a multiple significantly in excess of 1.0x book value, well above the valuation of our purchase levels.

From Daniel Loeb (Trades, Portfolio)'s Third Point fourth quarter 2013 commentary.

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Top Ranked Articles about Ally Financial Inc

Daniel Loeb Comments on Ally Financial
Third Point has invested across the capital structure of Ally Financial (ALFI), the former GMAC, throughout the company's multi-year reorganization. Today's Ally Financial ("Ally") fits the pattern of other profitable investments we have made: a highly successful, nearly-completed restructuring that remains undervalued, with an explosive earnings story led by a talented management team who are economically aligned with shareholders. Read more...

Ratios

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EV-to-EBIT 8.30
ALFI's EV-to-EBIT is ranked lower than
100% of the Companies
in the Global industry.

( Industry Median: vs. ALFI: 8.30 )
ALFI' s 10-Year EV-to-EBIT Range
Min: 0   Max: 0
Current: 8.3

Dividend & Buy Back

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Dividend Yield 7.20
ALFI's Dividend Yield is ranked lower than
100% of the Companies
in the Global industry.

( Industry Median: vs. ALFI: 7.20 )
ALFI' s 10-Year Dividend Yield Range
Min: 0   Max: 0
Current: 7.2

Yield on cost (5-Year) 7.20
ALFI's Yield on cost (5-Year) is ranked lower than
100% of the Companies
in the Global industry.

( Industry Median: vs. ALFI: 7.20 )
ALFI' s 10-Year Yield on cost (5-Year) Range
Min: 0   Max: 0
Current: 7.2

Valuation & Return

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Business Description

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Traded in other countries:ALLY.USA
Ally Financial Inc. is an independent financial services firm which provides financial products and services to automotive dealers and their customers. Its primary banking subsidiary is Ally Bank, which is an indirect wholly owned subsidiary of Ally Financial Inc. Global Automotive Services and Mortgage are its primary lines of business. Its Global Automotive Services offer a wide range of financial services and products to retail automotive consumers, automotive dealerships, and other commercial businesses. Its Global Automotive Services consist of three separate reportable segments — North American Automotive Finance operations, International Automotive Finance operations, and Insurance operations. The products and services offered by its automotive finance services include the purchase of retail installment sales contracts and leases, offering of term loans to dealers, financing of dealer floorplans and other lines of credit to dealers, fleet leasing, and vehicle remarketing services. It also offer vehicle service contracts and selected commercial insurance coverages in the United States and internationally. Its vehicle service contracts offer vehicle owners and lessees mechanical repair protection and roadside assistance for new and used vehicles beyond the manufacturer's new vehicle warranty. Its Mortgage operations engage in the origination, purchase, servicing, sale, and securitization of consumer (i.e., residential) mortgage loans and mortgage-related products.

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