If any investor has stood the test of time, it is Warren Buffett. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws literally tens of thousands of loyal fans who are also investors. Known for his long buy-and-hold strategies, and with a massive portfolio of public and private holdings, he remains one of the preeminent investors in the entire world.
The Federal Reserve has stated its intent to have the federal funds rate at 4.75% to 5.00% by the end of the year, or early next year. Wednesday’s 75-basis-point increase and another 50-basis-point raise in December should get us close to the finish line, with another 50 basis points, or perhaps even more in 2023, still to drop.
That does not bode well for some stocks, like utilities and real estate investment trusts. For financials, it means one thing: increased net-interest-income earnings. Net interest income is a performance measure that reflects the difference between the revenue generated from a bank’s interest-bearing assets and the expenses associated with paying on its interest-bearing liabilities. Assets that can earn interest for banks can range from mortgages to auto, personal and commercial real estate loans.
We screened the Berkshire Hathaway portfolio for the top banks and financial institutions and found six companies likely applauding the Federal Reserve’s increase in the fed funds rate. All six pay solid dividends and are rated Buy across Wall Street. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
The bank with no buildings is poised to have a very solid fourth quarter and 2023. Ally Financial Inc. (NYSE: ALLY) is a digital financial services company that provides various digital financial products and services to consumer, commercial and corporate customers primarily in the United States and Canada.
Its Automotive Finance Operations segment offers automotive financing services, including providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floor plans and other lines of credit to dealers, warehouse lines to automotive retailers and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles and vehicle-remarketing services.
The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contracts and guaranteed asset protection products, and it underwrites commercial insurance coverages, which primarily insure dealers’ vehicle inventory.
The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings.
The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies, leveraged loans and commercial real estate products to serve companies in the health care industry. The company also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services. The company was formerly known as GMAC and changed its name in May 2010.
Ally Financial stock investors receive a 4.34% dividend. Citigroup has a $34 target price, and the consensus target is $33.34. Wednesday’s close at $26.66 was down almost 4% for the day.
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