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Is Ally Financial Inc (ALLY) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Ally Financial Inc (NYSE:ALLY) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Ally Financial Inc (NYSE:ALLY) ready to rally soon? Hedge funds were getting more bullish. The number of long hedge fund positions went up by 9 lately. Ally Financial Inc (NYSE:ALLY) was in 54 hedge funds’ portfolios at the end of June. The all time high for this statistics is 57. Our calculations also showed that ALLY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 45 hedge funds in our database with ALLY positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Kerr Neilson of Platinum Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to check out the key hedge fund action surrounding Ally Financial Inc (NYSE:ALLY).

What does smart money think about Ally Financial Inc (NYSE:ALLY)?

At Q2’s end, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ALLY over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Oaktree Capital Management, managed by Howard Marks, holds the number one position in Ally Financial Inc (NYSE:ALLY). Oaktree Capital Management has a $283.9 million position in the stock, comprising 6.3% of its 13F portfolio. On Oaktree Capital Management’s heels is Kerr Neilson of Platinum Asset Management, with a $151.3 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Other peers that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, Adam Peterson’s Magnolia Capital Fund and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Punch Card Capital allocated the biggest weight to Ally Financial Inc (NYSE:ALLY), around 28.78% of its 13F portfolio. Magnolia Capital Fund is also relatively very bullish on the stock, earmarking 19.88 percent of its 13F equity portfolio to ALLY.

As aggregate interest increased, key money managers were leading the bulls’ herd. HG Vora Capital Management, managed by Parag Vora, assembled the biggest position in Ally Financial Inc (NYSE:ALLY). HG Vora Capital Management had $49.6 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $45 million position during the quarter. The other funds with brand new ALLY positions are David Rosen’s Rubric Capital Management, Kenneth Mario Garschina’s Mason Capital Management, and Dan Kamensky’s Marble Ridge Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ally Financial Inc (NYSE:ALLY) but similarly valued. These stocks are Credit Acceptance Corp. (NASDAQ:CACC), Livongo Health, Inc. (NASDAQ:LVGO), Formula One Group (NASDAQ:FWONK), WestRock Company (NYSE:WRK), BorgWarner Inc. (NYSE:BWA), Vail Resorts, Inc. (NYSE:MTN), and Hill-Rom Holdings, Inc. (NYSE:HRC). All of these stocks’ market caps match ALLY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CACC 23 985846 1
LVGO 36 338665 19
FWONK 49 1402496 12
WRK 32 461872 6
BWA 35 802792 5
MTN 37 753210 0
HRC 30 944643 0
Average 34.6 812789 6.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $813 million. That figure was $1636 million in ALLY’s case. Formula One Group (NASDAQ:FWONK) is the most popular stock in this table. On the other hand Credit Acceptance Corp. (NASDAQ:CACC) is the least popular one with only 23 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 88.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on ALLY as the stock returned 16.6% since the end of June 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.