Was The Smart Money Right About Piling Into Ally Financial (ALLY)?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Ally Financial Inc (NYSE:ALLY).

Ally Financial Inc (NYSE:ALLY) was in 57 hedge funds’ portfolios at the end of December. The all time high for this statistic is 57. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ALLY investors should be aware of an increase in support from the world’s most elite money managers in recent months. There were 53 hedge funds in our database with ALLY positions at the end of the third quarter. Our calculations also showed that ALLY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here). 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

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Do Hedge Funds Think ALLY Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 57 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ALLY over the last 22 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is ALLY A Good Stock To Buy?

The largest stake in Ally Financial Inc (NYSE:ALLY) was held by Oaktree Capital Management, which reported holding $500.2 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $271 million position. Other investors bullish on the company included Platinum Asset Management, Magnolia Capital Fund, and Adage Capital Management. In terms of the portfolio weights assigned to each position Punch Card Capital allocated the biggest weight to Ally Financial Inc (NYSE:ALLY), around 39.11% of its 13F portfolio. Magnolia Capital Fund is also relatively very bullish on the stock, dishing out 23.61 percent of its 13F equity portfolio to ALLY.

As aggregate interest increased, some big names have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the biggest position in Ally Financial Inc (NYSE:ALLY). Senator Investment Group had $48.1 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also initiated a $24.6 million position during the quarter. The other funds with new positions in the stock are Gregg Moskowitz’s Interval Partners, James Dinan’s York Capital Management, and Allon Hellmann’s Full18 Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ally Financial Inc (NYSE:ALLY) but similarly valued. We will take a look at C3.ai, Inc. (NYSE:AI), WPP Plc (NASDAQ:WPP), The J.M. Smucker Company (NYSE:SJM), James Hardie Industries plc (NYSE:JHX), DaVita Inc (NYSE:DVA), Raymond James Financial, Inc. (NYSE:RJF), and Packaging Corporation Of America (NYSE:PKG). This group of stocks’ market valuations match ALLY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AI 37 483532 37
WPP 6 37552 -1
SJM 34 580428 3
JHX 4 11803 0
DVA 32 4814258 -2
RJF 34 580848 6
PKG 16 128753 -7
Average 23.3 948168 5.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $948 million. That figure was $2594 million in ALLY’s case. C3.ai, Inc. (NYSE:AI) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 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 89. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on ALLY as the stock returned 45.5% since the end of December (through 4/30) 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.