Warren Buffett’s Berkshire Hathaway more than tripled its stake in Ally Financial in the second quarter, giving the conglomerate a close to 10 percent stake in the troubled U.S. auto and home lender. Berkshire increased its Ally holdings to about 30 million shares and was worth more than $1 billion at the end of June, according to a regulatory filing. The conglomerate now has a 9.6% stake in the company, making it the second-largest shareholder after index giant BlackRock, according to InsiderScore. Ally Financial has benefited greatly from increased consumer demand for new and used cars during the pandemic, resulting in a more than 50% increase in its share price from 2020 to 2021. However, the stock is down more than 20% this year as an auto. The market began to stabilize and higher interest rates reduced consumer appetite. Still, Ally’s fall in 2022 made the stock cheap relative to its peers, which might have emboldened the legendary value investor. According to Piper Sandler analyst Kevin Barker, the stock is now trading at just 1.0 times tangible book value. The conglomerate first bought just under 9 million shares of Ally, and the Omaha-based giant increased the stake significantly in the following quarter, when the stock fell more than 20%. The buy-short action has been a classic move for Buffett, who explained his thinking during this year’s annual shareholder meeting. “We haven’t been good at timing. We’ve been reasonably good at figuring out when we’ve had enough for our money,” Buffett said in Omaha in April. “We always waited for it to go down for a while so we could buy more.” Berkshire has been a net buyer of stocks for three consecutive quarters, according to regulatory filings. The conglomerate also increased its massive stake in Apple, while increasing its stakes in Occidental and Chevron. “Buffett was true to his word, as every stock with an increase in holdings this quarter was a new addition in the previous quarter or had additional shares purchased in the first quarter,” said Bill Stone, CIO of The Glenview Trust Company and Berkshire shareholder. Strong demand Some analysts believe demand for auto loans remained strong, creating a headwind for Ally. The company originated $13.3 billion in retail auto originations in the second quarter, the highest quarterly amount since 2006, noted JPMorgan analyst Kabir Caprihan. “Consumer demand for auto loans remains robust, and the rising rate environment coupled with supply chain challenges are expected to benefit net interest income growth,” Caprihan said in a statement. note The stock is also generally highly regarded among Wall Street analysts, with more than three-quarters of those covering Ally rating it a buy. Ally was founded in 1919 by General Motors, formerly known as General Motors Acceptance Corporation (GMAC), to provide financing to automotive customers. Ally remained GM’s auto financing arm until 2010, when the company was spun off and eventually changed its name. Although Berkshire’s stake in Ally is now below 10%, it’s not hard for some to see how the auto loan business could go hand in hand with the conglomerate’s core insurance business. Berkshire owns auto insurance giant Geico. Late last year, Ally acquired credit card company Fair Square Financial for $750 million, looking to expand its business reach. —CNBC’s Michael Bloom contributed reporting.
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