Brett Schafer, The Motley Fool

Sat, Jun 7, 2025, 6:15 AM5 min read

• Buffett-led Berkshire Hathaway stands as the largest shareholder in Ally Financial.

• The company will reach an earnings inflection through the rest of 2025 and into 2026.

• The stock looks cheap and could be a great dividend grower over the next few years.

• 10 stocks we like better than Ally Financial ›

It is hard to find cheap stocks trading at all-time highs, but Warren Buffett's portfolio at Berkshire Hathaway may be a good place to start. Berkshire Hathaway owns a large collection of stocks, and one that should catch people's eye today is Ally Financial (NYSE: ALLY). Berkshire owns close to 10% of the online bank and is its largest shareholder, having started a position back in 2022.

Many investors have soured on Ally stock in the last few years. The stock is off 37% from all-time highs while the rest of the market is soaring. But if you look at the numbers, now may be the time that Ally Financial begins to turn around its operations, meaning the stock could go parabolic in 2025 and beyond for those who buy today. Here's why this Warren Buffett stock may go parabolic for the rest of this year.

As an online bank, Ally Financial has two sides of the business that investors need to analyze: loans and deposits. The company makes loans in a variety of markets, but mostly for consumer automotive loans, which have been under some pressure in the last few years because of rising interest rates. Loans made in 2022 and 2023 have not performed as well as Ally hoped, while existing loans at ultra-low yields decreased its interest income, while costs paid to depositors soared.

These dynamics decreased Ally's net interest margin (NIM), which is a large indicator of what the company can generate in bottom-line profits for shareholders.

Now, all three of these factors seem to be normalizing. Deposit costs are decreasing due to the Federal Reserve lowering interest rates and Ally giving up on expensive depositors to competitors. Its 2024 automotive loan book is performing much better than 2022 and 2023 when it comes to delinquencies and 30 days past due metrics. The average yield it is earning on its automotive loan book keeps rising, which will help expand NIM through the rest of 2025.

Add it up, and Ally has a lot working in its favor coming out of the inflation-induced Federal Reserve hiking cycle. The stock is not earning much in net income today, but it has a recipe for greatly increasing its earnings in the next few quarters: lower funding costs, higher-yielding loans, and better-performing loans. Expect this dynamic to continue.