Buffett's "ALLY" - I
Kicking the can to oblivion - Week#19 (Founding Members Only)
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Buffett owns nearly 9% of ALLY, which is a key reason why the stock is at or near $40.
It doesn’t change the fact that ALLY -0.23%↓ continues to cater to the subprime consumer. According to our dealership sources, ALLY 0.00%↑ is heavily exposed to consumer car loans and underperforming dealership floor plans.
In addition, let us not forget ALLY’s past and how the Government bailed out the reckless bank after the financial crisis. In December 2014, the U.S. government finally disposed of its remaining $1.28-billion stake in auto lender Ally Financial Inc., resolving the last big bailout from an emergency government program to halt the 2008 financial crisis. The U.S. had owned as much as 74% of Ally after a $17.2-billion rescue, part of emergency efforts to prop up the nation’s auto and banking industries.
In a six-year transition- 2008 to 2014- Ally sold assets and put its subprime mortgage arm through bankruptcy before an initial public offering of stock in April 2014, refocusing on auto lending.
Fast forward to 2020-2024; ALLY has a huge exposure to subprime consumers and dealership floor plans - Based on our years of ongoing research, it is irrelevant whether Buffett owns ALLY - the bank is a toxic dump. And here are the reasons why….