Exploring Billionaire Louis Bacon’s Top Stock Picks

We recently unveiled a detailed analysis of Billionaire Louis Bacon’s Top 10 Long-Term Stock Picks. In this comprehensive article, we will delve deeper into how Ally Financial Inc. (NYSE:ALLY) compares to the other investment selections made by esteemed hedge fund manager Louis Bacon. Our goal is to provide insights not only into Ally Financial’s performance relative to its peers but also highlight what makes it a company of interest in the current financial landscape.

Who is Louis Bacon?

Louis Bacon stands as one of the most respected and influential hedge fund managers of our time. Renowned for his keen macroeconomic insights, he has adeptly navigated the complexities of volatile markets. As the founder of Moore Capital Management, he has established a strong reputation for achieving exceptional returns through a carefully calculated approach to risk management.

Born in 1956, his early life was imbued with a blend of business acumen and outdoor experiences, thanks largely to his father, Louis Turner Bacon, who chaired Reynolds Securities brokerage firm. These familial influences played a crucial role in shaping Bacon’s dual interests in finance and environmental conservation. He pursued higher education at Middlebury College, graduating with a degree in American Literature, and subsequently earned his MBA from Columbia Business School in 1981. This educational background set the stage for his impressive career in trading and investment management, enabling him to excel in diverse financial matters.

The Genesis of a Financial Mogul

Bacon launched his financial journey on the trading floor at Bankers Trust before moving on to Shearson Lehman Brothers, where he honed his skills in trading currencies, commodities, and futures. This extraordinary early experience as a trader equipped him with the tools necessary to spot macroeconomic trends—skills that later became integral to his personal investment philosophy.

In 1987, with a modest $25,000 inheritance, Bacon began his own trading account. His remarkable ability to identify profitable opportunities during the stock market crash that same year, where he gained by short selling, emphasizes his capacity to leverage tumultuous conditions for financial gain. Building upon this momentum, in 1989 he established Moore Capital Management, starting with his own $25,000 and an additional $1.6 million in seed funding, focusing on global macroeconomic investments.

Moore Capital Management’s Evolution

Bacon’s ascendance was swift and significant. In its inaugural year, Moore Capital achieved an astounding return of 86%, easily showcasing Bacon’s investment acumen. Over the ensuing decades, the hedge fund solidified its position as a titan of the industry, at one point managing over $14 billion in assets. Moore Capital exhibited an impressive annualized return of approximately 17%, consistently outperforming the majority of hedge funds in the marketplace.

Notably, Bacon’s adeptness at generating profits during economic downturns, exemplified during the 2008 financial crisis, further cemented his status as a preeminent macro trader. By the conclusion of the third quarter of 2024, Moore Global Investments reported a 13F portfolio exceeding $5.4 billion, with substantial holdings concentrated in the technology and financial sectors.

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For additional insights, consider our exploration of 30 Most Important AI Stocks According to BlackRock and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.

What Stocks Interest Hedge Funds?

In our analysis of stocks for this article, we meticulously sifted through the 13F portfolio of Moore Global Investments as of the conclusion of the third quarter of 2024. Only those companies that have consistently remained in this portfolio for the past three years were selected, as this signals a level of stability and confidence from hedge fund managers.

Why is there such interest in stocks favored by hedge funds? Research has shown that mimicking the top picks of successful hedge funds can often yield outsized returns relative to broader market indices. Our quarterly newsletter adopts a strategy that selects a combination of 14 small-cap and large-cap stocks each quarter and has astoundingly returned 275% since May 2014, eclipsing its benchmark by an impressive 150 percentage points (see more details here).

Ally Financial Inc. Overview

Ally Financial Inc. (NYSE:ALLY), a holding company providing a range of digital financial services to various stakeholders—including consumers, businesses, automotive dealers, and corporate clients—has garnered significant attention among investors.

Several compelling factors underscore Ally Financial’s attractiveness as an investment opportunity. For starters, the company’s third-quarter financial results for 2024 illustrate robust growth potential. Noteworthy figures include GAAP Earnings per Share (EPS) of $1.06 and Adjusted EPS of $0.95, reflecting a year-over-year increase of $0.18 and $0.12, respectively. Additionally, pre-tax income achieved $233 million, representing a $5 million rise compared to the previous year.

Furthermore, by becoming a presenting partner of the US Women’s Open, Ally Financial is likely to enhance its visibility while demonstrating a commitment to diversity—an aspect increasingly valued by investors. The ongoing modernization of the company’s technology infrastructure, particularly in areas such as artificial intelligence (AI) and customer relationship management (CRM), represents yet another reason for optimism regarding its future prospects.

Overall, Ally Financial ranks 1st in our evaluation of Billionaire Louis Bacon’s long-term stock selections, but while we recognize its potential, there may be other stocks poised for even greater returns in a shorter timeframe. If you’re seeking a stock that offers more promise than Ally, especially if you want to invest at lower valuations, we encourage you to look into our report regarding the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.