Yet Another Value Podcast - Sleepwell and Enlightened are allied in the $ALLY bull case

Episode Date: December 13, 2021

Sleepwell Capital and Enlightened Capital discuss their thesis for Ally $ALLY. Ally trades for just over book value despite posting ROEs well in excess of their cost of capital; Sleep and Enlightened both believe their valuable deposit franchise, reasonable valuation, and share repurchase program will combine to produce attractive returns for shareholders over the next few years.My notes on ALLY: https://twitter.com/AndrewRangeley/status/1467960317242134537?s=20Enlightened's twitter: https://twitter.com/CultivatewealthSleep's twitter: https://twitter.com/SleepwellCapEnlightened's Ally write up: https://enlightenedcapital.substack.com/p/ally-financial-ally-investment-analysisTSOH Ally write up: https://thescienceofhitting.com/Chapters0:00 Intro1:10 ALLY overview and history5:00 Laying out the ALLY bull thesis8:25 The ALLY valuation case9:35 How good is ALLY's deposit base?14:55 Does ALLY have a moat on their lending standards?20:10 Discussing ALLY's strategic relationship24:10 What is the market pricing into ALLY's stock?28:20 ALLY's capital allocation (acquisitions and share repurchases)33:15 Comping ALLY to a neo-bank35:50 Ally's insider incentive and share ownership (or lack thereof)38:45 Discussing Ally's exec comp and potential misalignment41:20 Of all the stocks in the world, why is ALLY worth buying?48:45 The decline of car ownership and rise of EVs as a tail risk52:20 More on what ALLY would do if auto loan demand decreased dramatically56:20 What's the end game for ALLY?58:45 Would ALLY be a strategic target for M&A?1:03:20 Closing thoughts

all right hello and welcome to yet another value podcast i'm your host andrew walker and with me today i'm excited to have two guests and we've got sleep well capital who will be calling sleep and then we've got enlightened capital who will be calling enlightened and they're going to stay anonymous but that's okay because i really respect them both sleep enlightened how's it going good thanks for having us yeah thanks for having us great uh hey thanks for coming on let me start this podcast the way you do every podcast first a quick disclaimer to remind everyone who's listening that nothing on this podcast is investing advice. And then second, a pitch for the two of you, my guests. You know, it's a little different having two guests on instead of one at the same time. But both of you run some

of my favorite blogs. You do great fundamental work on companies. Obviously, Sleep is the master of of the music industry. I've learned so much from here. But I've been longtime followers of both of your blogs, love them both, required reading for me. So really excited to figure out a ways to have you both on the pod. And that out the way, let's turn to the company we're going to talk about, the company's Ally Financial. The ticker is A-L-L-L-Y, ally. And sleep, enlighten, whoever wants to start, what is Ally, and why are we so excited about it today? Yeah, so I can kick it off. And I think it's important to understand that the history of this company as well in the context of, you know, kind of where it came from and where we think

it's going. So ally financial is the largest online bank in the, in the U.S. It has $130 billion in deposits, but probably it's historically more known for its auto lending business. So it actually rebranded around 10 years ago. This used to be the GM auto lending business. So it was the GM auto lending business. We know what happened to General Motors in the financial crisis. So basically what took place during that time, given the distress in the auto industry and the OEMs, was that the captive financing arms kind of got separated from the parent companies.

In the case of GMAC, it turned into a bank holding company in large part so they could receive TARP funds. at the same time, you know, something that kind of got them into big trouble was that they sort of diversified, quote unquote, away from auto lending and started getting big into mortgage lending. I think they were actually one of the biggest mortgage lenders back in the 2000s. So RASCAP, which was part of GMAC, was really what, you know, what, what, what bled the most money during that time in this part of the of the business. So it received multiple, you know, tarp injections. And after, you know, a couple of years of trying to solve

their legacy, their legacy business, you know, they were able to finally sort of lay off that mortgage portfolio through a bankruptcy and a couple of settlements. And finally, and they also did the rebranding and turned into ally bank because they also received the Chrysler the Chrysler loan book and in 2015 it IPO during this time as they as they went through the rebranding they also established an online an online bank that has grown you know at incredible rates I would say the past five to 10 years have been around 20% Kagar in the possible profit growth. And, you know, they've been focusing on this, on this newer part of the business for the, for the past five years. Enlighten, I don't know if you want to add some

to that. Yeah, I know that was a good overview. But yeah, really, you know, over the last 10 years have really grown. Their online bank, they're now the largest online only bank in the U.S. So they don't have a branch network, which is a really interesting aspect of the company, leading to a lower cost structure, and they're also, you know, as they mentioned, you know, the largest one of the largest auto lenders in the country as well. So those are a couple of unique aspects. When the IPO, the government owned a good portion of the company, which, you know, has since been repaid. So that's, yeah, that's kind of a nice overview of the company. Perfect. And I'm going to dive into a bunch of different parts of that in a second. But in

Leiden, why don't you start? Because I believe you had a post on your blog recently about Ally, if I'm remembering correctly. It's tough because we're in COVID and I can't remember who wrote what, but why don't you just start, you know, you've laid out the basis of what the company is, but you're both the tracks to the company because you think it's undervalue. You think that there's a, you know, you can make a lot of money on this thing. So, why don't you just lay out the simple kind of, why is this undervalued both case here? Sure, definitely. So a couple of key aspects. One, the company is substantially brought down It's funding cost over time.

When the company IPOed, they were still in the process of building their online bank. So most of their funding was really secured, unsecured debt. And over the past, you know, since they IPOed, they brought that down to about 10%. And now 90% of their funding is deposit on them. So they've really reduced the costs of funds over time. It's now down to about 1%. And it's been as high as, I think, 5% or so when they had in 2010. It really brought down their cost of funding.

And as a result, they've seen pretty strong improvement in margins. Their net interest margin over time. They're actually this year, they're up about 100 basis points over last year. So they're in that 3536 area. Their net interest margin. And that compares to other large U.S. banks that are in the high ones area, low twos. So they have significant margin, you know, differential between them and other large U.S. banks, money center banks, large regionals.

They also have a lower cost structure as a result of the being online only. They have a much lower efficiency ratio, which allows them to then pay a higher rate on deposits. So one of the key reasons that they've been able to grow their deposits at such a high rate over time is that they're paying much higher deposit rates than a Bank of America, GP Morgan, a Wells, typically about 50 basis points higher. And really all that cost savings is a result of having no bank branches. So they've attracted a ton of deposits. And it's also driven by, you know, the overall model, better customer service. They've continually won awards being the top online bank, you know, over the past five plus years. But as a result, you know, they've seen a really, really strong deposit growth, which has then led into the lower funding costs.

So that's one of the key drivers here, one of the key advantages for the company, to stronger margins, lower cost structure, stronger growth there. And then another interesting aspect of really the last few years, the company has started diversifying away a little bit from auto in terms of the asset side of the balance sheet. So their auto business, including loans and insurance, is still about 90% of earnings, but over time, you know, I see that declining. They've added a number of capabilities.

added mortgages again. And this time it's not subprime. This time it's, you know, much higher quality mortgages. The average FICO score is like $780 in their mortgage book. They've added personal loans. They've added corporate loan lending. And just recently in the third quarter earnings, they announced the acquisition of a credit card company, Fair Score Financial. So that really rounds out their product offering for a consumer. So now you can get checking savings account, credit card, personal loans, mortgage. You can also trade and invest through Ally as well. So a lot of those additional product offerings have been added through acquisitions in the last three to five years. Perfect. So that's great. And you know what I love? I love that I said lay out

the bulk case for me. And you didn't mention valuation once. You just talked about, you know, their advantage for deposits and everything. So I'll mention valuation for you. You know, the stock trades at 1.2 times, 1.1 times book somewhere around there. And the way I've always looked at banks is, all right, if you're a normal bank with no competitive advantage or anything, you probably deserve to trade for about book. You'll probably make about your return on capital, probably around 8% ROE, I don't know. So you trade around book. So at 1.2 times book, you would think this is a company that's earning a little bit above their cost of capital. And I'm just looking at the slides, you know, this is a company that right now, their return on equity

is over 20%, probably comes down a little bit over the long term, but they've consistently done mid-teens, high-teens, 20% ROE. If that's the case, this is a company that should trade for, you and I could argue two times a book, three times a book, going to depend a little bit on, is it 15 or 20%? How big is the growth prospect, right? So that's the valuation case. I want to dive into some of the things you said there, right? Because R.O.E is going to be a function of two things. How cheap your deposits are, which lowers your interest costs, and how good your loan book is, which increases your name. So sleep, I guess, enlightened started, but on the deposit side, you know, deposits are a commodity to me. And he mentioned they pay less for the deposits because

of the online model. And I kind of looked at it as, okay, I get that. But, you know, the bank, the traditional banks, the Wells Fargoes, the JP Morgan's, they've got the lowest cost of deposits because they're around every corner and people go put their deposits to them. Alley is online. I don't understand why they can pay higher rates in the banks, but lower than all the other online players, because there's tons of online. players, you know, SO-Fi, everyone's trying to get there. Why can Ally sustainably pay more than JP Morgan, but less than all the other guys? And that's kind of where their edge is. Does that make sense? Yeah. Well, I think when it comes to deposits, rate is definitely a very important,

you know, aspect of deciding who you're going to bank with, but it's not necessarily the only one. And one thing that Ally has done really well is building, you know, a customer experience that's very seamless, easy to use, low fees. So they've, you know, they've never had, for example, ATM fees. They took away overdraft fees. If you want to talk to a person on the phone, it'll probably take you, you know, three minutes to wait for that representative to answer. So they've, I think they've built a product. that has tailored to millennials really well, the majority of their customers are millennials.

And these kind of customers, you know, really appreciate kind of having that online experience that they're looking for. So even the Valley is not really being, you know, that kind of the top payer, it's, you know, looking at their retention numbers at 96% on an annual basis compared to industry average of around 85%

and really speaks to kind of the customer engagement and, you know, just these people are happy banking, banking with Alley because they're really, you know, helping them out with all their financial needs. So I don't, yeah, go ahead. Yeah, I just want to drill on that because as a stupid generalist, right, who started looking at ally a day and a half ago and actually is pretty interested in everything you've seen. But, you know, everything you just said makes sense for the stickiness, right? Sleep deposit, makes it a deposit there. He loves it.

great customer service. And then Andrew comes along and says, hey, sleep, Ally's paying you 1%. Why don't you switch over to me and I'll pay you 1.1%? And you say, no, no, no, no, I love it at Ally. But for attracting new money, because Ally has attracted a lot of new money. It seems like if Enlightens looking for a new place to park money, my 1.1% offer versus your 1% offer, like he doesn't really know how great the customer service is there. This is the old hot money deposit thing, right? There's lots of banks who would grow on hot deposits, but then somebody come along and beat him by 10 basis points and they lost them all. So how can I, How has Ellie been growing while offering less than kind of other online players?

Well, I think part of it is word of mouth. And they've also been really effective on their marketing campaigns. It's interesting because I was actually listening to a podcast of their chief marketing officer. And I mean, I would have never thought I'd end up kind of, you know, doing research on the marketing department of a bank. But it turns out this is a very big part of this company and kind of the culture. And they've done, you know, all these different initiatives that have really helped the awareness of the brand across this part of the millennial market that seems to have been working really well. I mean, if we, you know, if we go back 10 years, you can see the deposit growth has been pretty, pretty consistent as we were talking about. It's been close to 20% since then.

And so I think what they're doing is working and, you know, through that combination of their effective marketing campaigns and kind of the word of mouth and happy customers that love banking with them, I think has helped them, you know, to maintain that growth. I don't know, if you have anything to add there, enlightened. Yeah, no, I think that's all spot on. You know, they continually win awards the best online banks. So I think they're just, at this point, they're established and they're known for all their capabilities.

And I think additionally, with all the additional products that they're starting to offer that they have been offering in the last few years, I think that helps achieve, you know, stickier customer relationships and also helps them attract new customers, you know, especially now with the credit card offering as well. So I think all of that kind of works together. Perfect. And I should just note, I'm such a bad podcast host, but I'm just going to reinforce for listeners, sleep and Enlighten, both write blogs. They'll be linked to the blogs and the show

notes. You guys should definitely check them out, subscribe. I'll include Enlightens. I think it was February as I was looking up, his write-up on allies. So I'll include that. Everyone go check that out. I feel like a bad podcast so is for not hammering that home. But let's continue and ignore my oversight. So the second part, I think we did a credible job just now talking about how they attract deposits, how they're sticking us there. Let's turn to the other side, right? So you've got deposits. You've got a low cost of funding thinks that you've got to make money on the loans, right? And And they do have strategic relationships with GM and Chrysler, which are really beneficial, and we'll probably talk more about the strategic relationships. But I was struck by a quote, which I included in my notes when I was preparing for this.

And they said, it was a quote around, hey, we have a very high strategic most around our business because you need very sophisticated underwriting and service capabilities. And that struck me because, again, when I look at banking and lending, I think it's the ultimate commodity to play. borrowing a dollar from you versus me, depositing it, it's kind of the same you go with whoever gives you the best rate, right? And here, auto lending, I get, you and I probably can't lend autos, but it seems like there's a thousand people who could lend auto, lend against autos pretty well. So why, their results have been great. Why do they have a strategic mode around lending? Like, what, what data advantage do they really have against a J.P. Morgan lending or, you know, any of the other 100,000 people who can give an auto loan?

Yeah, that's, that's a good question. I think there. there's a couple things that differentiate them. I think one is the fact that, you know, they're viewing their dealerships as their customer, really. So their work is to service the dealership. So it's not only, you know, lending money to the consumer, but it's also dealership floor plan loans. So not, you know, not every auto lender is going to offer loans to the dealers themselves. Can you just describe what a dealership floor plan loan is for the listeners? Sure. So, you know, the dealerships need substantial inventory to attract customers. And so Ally is lending money to the dealerships to help them maintain, you know, substantial

amount of inventory, which has actually been a real headwind over the last 12, 18 months due to COVID. You know, inventory is way down. There's no inventories. There's no inventory. There's nothing to lend to. Their commercial loans are down almost 50% in last year. But nevertheless, that is a key capability that they have that many of their peers don't. Another key differentiator, which people, I think, don't realize when they think about Ally is Ally actually is a big insurance business. It's not auto insurance like a progressive or Allstate, but it's warranty insurance is a big one, you know, insurance for the consumer, but also insurance for dealerships to

ensure their inventory as well as just sort of general property casualty insurance. So they have really sticky relationships with these dealerships because they can bundle all these products. And something like 80% of their dealerships also have insurance as well as, you know, the auto lending. Can I just zoom in a little harder because you did a great job explaining it? But I want to make the one part I think that was missing was what is the moat around that, right? Like they've got the relationships and everything for sure. But again, on dealer floor plan, it doesn't seem like it should be that hard. Like you're lending against, I'm going to pick a number out, 100 cars.

If I lend to 100 cards to enlightened and I lend 100 cars to sleep well, they're all coming from the, they're all coming from the same GM. It's auto dealerships. It just doesn't seem like it should be that hard to break into the industry. So is there any real like strategic mode I'm missing? Or is the relationship, is it similar to a lot of small businesses where the relationship is you've got to go knock on some doors and it takes a long time to displace that? So the second part is definitely a big part of it. They have about 20,000 dealership relationships. So these are, some of these are, many of these are really mom and pop, small dealers that don't have large networks. And they're the biggest too, right?

Right. And they are the biggest. So that is a big advantage. Just the scale, the number of products they can offer. And then the insurance side, too, is something that a lot of their peers are not going to offer. And I would say, Andrew, also on the auto lending is, it may not be that intuitive, but it's not the same as lending to a house where you're basically, you know, when it comes to, to pricing and the value of that house, you're just looking at comparables, right?

The pricing on autos is not as transparent because also remember, they have a big used car lending business. So because there's such a big national player, they have a ton of data that they've, for the past 100 years, actually, because they've been around for so long, to kind of track the performance

of all these different loans for all these different models. If you think, you know, there's probably thousands of different, car models out there of different vintages, et cetera, and they can probably price a lot more appropriately than someone who's just coming in and, you know, and started lending out without having access to this data and the track record that they have. And I think also what they've shown is they've been very flexible in terms of where they're playing depending on where the market is.

So, for example, the used market right now is super strong. So they've shifted. a lot of their underwriting capabilities to that part of the of the market five years ago they used to lend more on on the super prime but then kind of the you know the actual near prime or just above prime became more attractive because there was less competition and they started migrating the book towards that so they've shown that that they can adapt pretty quickly to these to these market changes and their loan book actually turns around pretty quickly in around three or four years that's fantastic let me just one more thing on the loan. So they've got the relationships with strategic relationship with GM and Chrysler.

I believe the Chrysler relationship might be going away at some point. I think Chrysler's taking the first steps to kind of having their own internal capabilities. But what does the strategic relationship with GM mean? Like if you are a GM dealer, could you work with someone other than ally? Are you kind of forced to work with Ally if you want floor plan financing, insurance, all that type of stuff. Let's not all talk about talking about talking for it. I can take it. Actually, just to be clear, the GM relationship used to be exclusive, but that that agreement

basically terminated a number of years ago, actually. So one thing that I think they've been able to show, and it speaks to the track record is that they were able to diversify away from those lost volumes via new growth initiatives and kind of new dealerships. So they still lend a big, you know, a big part to GM automobiles, but it's not exclusive anymore. So it's just like a strategic partnership now? Because I know they highlight the partnership.

Well, they're still a big, yeah. So they still have the relationship with a lot of these dealers. but they're just not the exclusive financing arm to these dealers anymore. These dealers can end up choosing someone else. In many cases, it's GM themselves that end up taking a loan. But the other thing I'll say is that they're not necessarily competing in the same parts of the market and FICO scores that some of these captives focus on. the captives have been very focused on leasing, for example, and sometimes look at a different

credit scores as well. So I think Ally is very well aware of what the captives are, what these financing arms of the big OEMs are doing, and they've been able to adjust pretty well over time. And you're correct that Chrysler is going to set up their own captive as well, and allies is well aware of that. And, Enlighten, I'll let you out on there, but I will just say to me that, again, I've only looked at the company for a day, but that makes me a little more bullish, right? Because I had thought that it was an exclusive partnership. So there was the possibility they were over-earning a little bit because it's exclusive. But the fact that they're actually out there competing with an internal GM arm and you know, you me and whoever else wants their money

around and they're still earning these returns and growing and doing well, that's a much different story than if it was a completely exclusive and they might be over-earning. But did you want to add anything to what Sleep just said? Sure, yeah. So yeah, GM also has GM finance. that's the other entity that that you know it issues loans but um yeah just in terms of their origination mix in 2014 when they IPO they were about 80% GM Chrysler and now they're 50% GM Chrysler and the other 50% that compare their growth initiatives which is you know through Carvana CarMax they do a lot of lending through some of these online players so and none of those are exclusive those are also yeah right but so they've they've you

you know, consciously diversified away from Jay and Chris. And there's other brands as well, like Mitsubishi and, yeah, whatever. Yeah. Okay, so I think we've done a nice job of explaining, hey, this is a company. You know, the ROE is 15, 20% or something. And the ROE is going to be a function of your cost of capital.

So that's mainly deposits on one side. And how good you are at lending. So that everything. And I think we've done a good job of talking about both of those sides. So the obvious next question would be, okay, guys, great. You've just described by they've got an advantage that a cost of deposit, got an advantage on the lending slide. This is a company that's trading

for 1.1 or 1.2 times book. So clearly the market is looking at this company and saying, we don't think returns are sustainable, right? You can barely earn above your costs of capital. So I know both of you are bulls, so you think the market's wrong, but what is the market seen? What is the market pricing in here that, you know, returns are going to come down over time? I mean, I guess I can start. I think a couple things. I think historically, this company was pre-COVID was kind of earning 10 to 12% ROEs, and that had come up since the IPO. So I think historically, that's kind of where the company was. So I think it's a little bit of a show-me story, and I think over the last year, management

is really guided to much higher ROEs than the company has generated historically. And I think based on all the things we talked about, lower funding costs, new products, et cetera, you know, I think, I personally believe the company will get there, but I think it's still kind of a show me story because 2021's results have been positively impacted by reserve releases from last year. So that's, you know, non-recurring. There's been some positive impacts on the used car side from higher used car prices. So that's also, you know, not recurring. But I think if you look at management's guidance, they're talking about 15, 16 percent returns on an equity in a more normalized environment.

So they're already taking that into consideration that, you know, use car prices are really high. They're going to come down as inventories normalized. But again, I think it's kind of a show me story because that's a much higher level of earnings than the company has had historically pre-cove. And sleep, I'm going to let you dive in, but that was exactly what I was thinking, right? This is a company that returns have gone up a lot thanks to COVID and just all the funkiness with that.

And what it seems to me with the stock at 1.2 or about 1.2 is the market is discounting, hey, this is a great bump, but you're going to go back to 10% over time. And what the two of you are kind of betting on is we don't think it's going back to 10%. Maybe it's probably not staying at 20 or 25, but we think it's going to 15, 16, 17. And at 15, 16, 17, this is a 2x plus business. Sleep, did you want to add anything there? Yeah, I mean, I'll just echo a couple of things that had enlightened touched on. You know, management has been pretty clear in the fact that they're underwriting based off a normalized environment where used car prices decline, right?

So they're definitely over-earning right now, and management knows that, and we know that. But once things, you know, return to a normal environment, it's not like things are going to come crashing down, right? And I think this is kind of a nuance in terms of really understanding the impact that used car pricing has on their loan book, right? The two places where it really hits them is on the loan side, it's only when a consumer defaults, right? So even if you have car prices crushed, you know, coming down, whatever, 30, 50%, but you have a low default environment, it's not going to be that bad for them because, you know, they'll just, they'll just repossess the vehicle and

recover less than they, and they would otherwise if used car pricing was a bit stronger. the other part is on the on the leasing side of the business which is is not that big a part of the of the business and again i think they're they've been pretty clear on the fact that they are underwriting for a normalized environment so they are seeing a short-term benefit right now but in in a kind of a 20 late 2022 23 scenario when things uh become become more more traditional in terms of of this you know the curve of use car pricing um that i i have all the reasons to believe that management is going to hit their return targets and they've been pretty clear in terms of how they can get there. Perfect. I want to move into, this is an overcapitalized

company. I want to move into the M&A. They're doing the share buybacks and everything. But I want to pause here. We've talked about the cost of deposits, return of equity, the loan. But is there anything on kind of this valuation, funding, cost of capital side that you guys think we should have talked about a little bit more? No, I think we, I think we hit all the key points. Yeah. Perfect, perfect. Just wanted to make sure.

So let's go to the next point. You know, one of the great things about going from 10% ROE to 20% ROE is suddenly you're gushing cash flow, right? These guys are way overcapitalized now. They've been pretty clear about that. And they're doing something with that overcapitalization. They're doing some acquisitions. They're doing some pretty nice share buybacks and everything.

I think that's great. And I just want to talk about, you know, the acquisitions are strategic. They seem really interesting to me. the share buybacks at 1.2 times book are really interesting to me. But let's talk about what they're doing, how they're kind of growing intrinsic value through capital allocations. So, and Lennon, why don't we start with you and then we can switch it over to sleep? Sure. So yeah, on the repurchase side, so because they're, you know, bank holding company in the U.S., they're regulated by the Fed. So they have to basically get Fed permission in terms of dividends and buyback. So last year,

unfortunately, during COVID, they had to pause share repurchases. So to your point, they began the year super overcapitalized, you know, well above their targets, well above Fed requirements. And they got Fed approval for $2 billion of share repurchases this year. And they're well on track for that. So they're going to repurchase $2 billion this year, you know, which is substantial relative to the size of the company. Yeah, I'm pulling up the market cap right now because I couldn't remember it off the top of my head. The market cap here is like $16 billion.

16 billion. So we're talking about over 10% of the capital. I mean, that is a big boy share by that. Yeah. And they have a long history of repurchasing shares. They've, I think we purchased over 25% of shares in the last. Yeah, since 2016 or something. And I like, just to add on to that really, really quickly, I like how they've framed it in the past too, because you can tell that management understands the math of these buybacks when we know very clearly that many times the best management, a lot of good management teams don't even think about buybacks that way, but they've explained how buybacks are kind of a really, you know, high ROE investment on themselves, right? So I've always been attracted to how they think about that. Share buybacks, consistent share buybacks at reasonable to unreasonable prices and unreasonable, I mean, very cheap prices are, they're just catnip to me. Every time I look at my portfolio and I see something that doesn't have an ongoing share buyback, I'm like, why do I own this thing? And maybe that's a fault of mine. but I really love having companies that share buyback.

The other way they're taking advantage of their overcapitalization is they're doing some M&A. They recently announced a deal, you know, it wasn't huge in the grand scheme of things, but I think it was very strategic, very creative. I'm interested in that deal both on its own merits and because it kind of speaks to some deals they could do in the future that could be strategic and continue kind of expanding that deep strategic mode they talked about. So, Sleep, do you want to talk about their most recent deal and how they kind of look at M&A going forward? Sure. And just to, so, because I don't think we've, we've actually talked a lot about

this, but in terms of their new growth initiatives, if you think about their deposit product haven't been, well, they've been working on that for the past 10 years, they've slowly been adding complementary products to that, right? And Enlighten mentioned this, but you have the kind of mortgages, personal lending, there's also an investing platform. And if you, if you look at kind of that full banking spectrum of offerings, the one missing piece was credit cards. So I think this was pretty much expected. And so they did announce that this recent acquisition in the last earnings called Fair Square Financial. As you said, it's not really that big of an acquisition, but I think it makes sense in the sense that it's going to give them a platform to

grow out of. And that's what they've done with these other ones. If you look at the personal lending side, they also started out with an acquisition. If you look at investing, they bought Trade King a couple of years ago. So they're executing on that exact same strategy of buying a quality asset that has a good track record at a good price and sort of building on top of that. and a lot of it will come down to, you know, kind of cross-selling the product to their existing deposit customers. And, did you want to add anything there? Yeah, really the only thing to add is they've done a really good job growing all of these, you know, additional products. And they're all relatively small from an earnings perspective right now.

But I think over time, that'll be a really nice diversifier. And now multi-product customers are up to like 9, 10%. And that's from zero in 2016. So they've done a pretty good job growing all these product lines. This might be me putting too much of rose-colored glass zones. But it's an online bank, so it makes sense. But I was impressed by when reading through it, how similar it is to a lot of like the, I guess the neobank startups and stuff where they talk about,

hey, we started with this one product, mainly loans. Then we went to deposits. Nobody had more than one product with us for the most part. But now we've got this massive deposit bank base. We've got a relationship with millions and millions of consumers. As Sleep was talking to earlier, our NPS is really high. We're the best online bank. And we've got all these gaps to fill them. They've just slowly filled them. Like, it's a little surprised at me that they chose to fill investing before they did credit cards because credit cards are just so bread and butter with a deposit base. But, you know, it just seems like a new bank strategy. And it all makes total sense to me. Yeah. And it's interesting because they've they've kind of considered themselves the original fintech because, you know, they started an online bank in two. 2009. And I mean, I can't think of anyone else that would have said in 2009, oh, let's start

a bank, right? Like, that's probably the worst, the worst time if you think. But now that you look back, it made a lot of sense the way that they did it, right? So one of you said it. I can't remember who I'm sorry. But you said this was, you know, they already had investing. They've got the auto loans. They've, they now they have credit cards. I think you said this was the kind of the last missing piece to their offering the whole suite of financial products. It's kind of the obvious piece, right? Like, you could add more products to this, but of the traditional banking. I don't see any crypto offering on the website yet.

Exactly, right? And what, do you agree with that? Or do you think there's any kind of maybe not so obvious, but, you know, strategic things that they can bolt on or out on here? I think on the consumer side, they have a really nice product portfolio. I think they'll, you know, just continue to grow and build these out. I think on the investing side, you know, their asset base, their AUM is pretty small relative to a lot of the really scaled players.

So, you know, I'd like to see them kind of scale that up over time. But yeah, I think from a portfolio perspective, they're, you know, really nice product mix. Okay. Let me a little bit of pushback here. So I think my first and biggest pushback would just be, all right, everything you're saying, and I think everyone can tell when I listen to this, I think this is a great pitch. I think it's really interesting. I passed over it for a while for reasons. We'll discuss a second. But I think the biggest pushback would be, okay, that's great. It's cheap. They've got a great

strategy. They've got a great mode. It's under earning. Their returning capital. Why don't insiders agree, right? Because allies been standalone for a long time. Insider ownership here is pretty poor. I can't remember off the top of my head, but the way I generally look at it is, I look at the CEOs pay versus how much stock he owns. Can't remember what exactly it is, but it is not a great ratio here. Insiders, I posted this, the last chart in my kind of tweet thing. I posted it. We haven't seen a single insider buy. I think there might have been one or two at the depths of March 2020. But, you know, this year it's just tons of insider sales. Not one or two. It's just insider sales every month

constantly. And, you know, when I look at that, I look at no insider ownership, constant insider selling, I look at that versus a story where I say really reasonable valuation, maybe unreasonable on the cheap side, returning capital. They seem to get on capital allocation. I say, well, they seem to get it, but they don't seem to be putting their own money here? Like, what is the divergence here? Why are the insiders not kind of really taking advantage of these prices? Yeah, so I think that's definitely a good point and very valid pushback. When it comes to kind of judging, judging management for me personally, you know,

insider ownership is obviously a big part of it. But, you know, I'm not necessarily going to discredit them too much for that because I, you know, I kind of take a step back as well and try to look at their track record and how they're incentivized in terms of, you know, like their long-term, their long-term incentives, right? So in the case of ally and their executive officers, their long-term pay is based off ROTCE and and tangible book value per share growth, which kind of explains why they're aggressive on the buybacks as well. So from that side, I think, you know, shareholders are pretty well aligned with the management team. I agree that the board doesn't have as much shares as I would like them.

And I think the CEO has, you know, if you include like the RSUs and PSUs, et cetera, has around 40 to 50 million. Like if you ask me, yeah, I would like him to have more, but I'm not going to. you know, I wouldn't necessarily, like, discredit him or penalize him because he doesn't own enough share. I actually like the CFO a lot as well, but she only became CFO. I think it was two or three years ago. So I also wouldn't expect her to have a ton of shares at this point. But that's kind of how I think about it. I agree. Like, I would like them to have more, but I'm not going to penalize them for that in my mind. Can I just do one more push back there? So you said, Hey, they are the CEO, I look at how they're paid and they're paid on return on tangible capital

employed, I believe it is, and tangible bulk value, which is great because ultimately how investors are going to make money is tangible book value growing and return on capital going up, right? Right. But I do worry, you know, it is not the same as them getting paid on total shareholder return, which there's issues with that too, but when you say we're going to get paid on tangible book value growth and return on tangible capital going up. you know, return to intangible capital going up, the best way to do that is to lever the shit out of the balance sheet and really put it the company at risk. And tangible book value

per share going up, the best way to do that is not to buy back shares when they're cheap, because if they're over book value and you're buying back shares, you're actually decreasing your tangible book value for share, right? So do you want to see what I'm saying where I could be a little bit worried about? Right. Yeah, that's a good. That's a good point. It is tangible book value per share. But that still goes down when you buy it. Yeah, you're right. When you buy a book, I guess it's not as a, it's not a creative, right? This is the old, oh, Facebook's tangible book is $2 per share and they're buying back shares at $200. They're destroying value. It's like, no, it's worth a lot more. Right. I mean, the intrinsic values is really what matters at the,

at the end of the end of the day. And I mean, one one thing that I think is worth pointing out to is is that if you look back over, I mean, the last three years and kind of the, the thresholds that they have for each of those of those metrics, they've been going up in time. So it reflects where, you know, where management thinks the company can go and they're kind of their, their credibility. So I would, I would think that at least makes me more comfortable with looking at those metrics. And Leid, did you want to add anything there? Or I have another question for you, actually. Just very quickly, I'd say, I think management was dealt a really bad hand when this company IPO. This was not a high-quality company in 2014,

2015. And they've done a great job, all the things we've said, but, you know, really chiefly building up the product portfolio, lowering the funding costs, building up the online bank. I mean, they've done, they've, management, I think, has proved a really good track record or last, you know, five, six years. So, so yes, I prefer they own more, but I think the track record and the way they're compensated, you know, are two strong positives. Let me ask my next question. This is the reason I've historically passed on Ally, despite, you know, some great write-ups. There was a science-of-fitting write-up that was very timely.

It came out yesterday, which I thought was great. I know you wrote this up 30% ago in February before the stock had a big run. But I will always remember a couple years ago, somebody came out with a bank pitch. And somebody else, it might have been literally an egg on Twitter, but they said, of all the stocks in the world, your best pitch right now is a bank. And what they were saying, or at least what I interpreted them as saying, was like, okay, yeah, you can make some money in a bank, but, you know, it's not going to be, I know, Sleep Love Spotify.

It's not going to be Spotify where people revalue it from, oh, they might win music streaming to, they have one music streaming there, Netflix 2.0. The EV goes from $50 billion to $300 billion in three years, right? With Ally Financial, we're talking about a stock at 1.2 book. maybe it belongs at two book, but, you know, there is, there's tons of blowup risk. I think of Wells Fargo, you know, five years ago, Wells Fargo is the gold standard. Buffett says it's the opportunity costs I evaluate everything else on. And today, Wells Fargo, I think is trading blowbook. I haven't looked in a while. But, you know, Wells Fargo's reputation is tarnished. And, you know,

you look back to the financial crisis. Banks seem like they're just mending 20% ROEs forever. And then everything blows up. So I guess my pushback. And the reason I ask this of you enlightened is because, you know, I'm looking at your recent write-ups there's Progressive, which very interesting company, insurance company, great underwriter, but it trades at four times book and there's a lot of fintech coming in insurance. First Republic, incredible bank, but, you know, honestly, it could be Wells Fargo 2.0, right? Right now everybody talks about the culture, but five years from now, maybe they were ripping off all their high net worth clients. So I wanted to give that both overall and ally specific to you. You know, why is our best idea versus all the other things in

the world we can invest in, a bank trading at 1.2 times about value. That's a loaded question. I'm sorry to ramble, but it was the thing when we were going to talk about it, that was the thing in my mind as I researched this. Maybe, yeah, I have some thoughts on that and maybe you can add after it. And it's definitely a really, a really good question. I think they're in a sweet spot where this, as Enlightenment just said, this used to be a turnaround story for a really long time. And they've basically, you know,

they're behind that. I don't think the market is giving them credit for that at this, at this valuation. If you actually look at where this traded at the IPO, it was trading at 1.1, 1.2 times both. And, you know, they had all these headwinds going against them. The ROEs were probably at like 7 or 8 percent. And, you know, we're talking twice that on a normalized environment at this point. So the way that I think about it in the next. you know, kind of four to five to five years is, yeah, you have a one point, one point two times book value, but it's not necessarily just going to be the multiple expansion to me going forward. At the same time, the book value is, is growing at a mid-teens percent at this,

at this point. And you also have the buybacks that have been, that have been pretty, you know, opportunistic over time. So, you know, I'm pretty comfortable on the writing, you know, kind of a 20% plus IRA on a four to five year basis, which, I mean, when I look at other opportunity sets out there and even in my portfolio, there's not that many that I get to that level. Not so much today, but you know, at the height of the growth stuff in February or maybe even July, I think there would have been a lot of people said 20% IRA for a few years, try a few days.

And today, you know, 20% IRA, that is literally world beating. returns. Yeah. Yeah. And I have some confidence on that, too, because of what we explained, right? Like, there's some good disability with the asset side and the funding costs coming down, et cetera. So. And like, Slip jumped in and stole your question. But I want to flip it over to you, Slee, you did a great job. I'm just kidding. But I want to flip it over to you talking both about ally and then maybe we can also just generalize. Because again, progressive, first republic. It seems like you do like these stories with great companies that I can do the same thing. You can kind of spreadsheet model on where a book is 10 today. They're going to do 15%

already. But I'll flip it over to you. Sure. Yeah. I mean, I'd agree with sleep in terms of, you know, thinking about IRRs over time and, you know, getting similar number in terms of expected IRAs. You know, you get the multiple expansion. But even without that, I think they'll continue to drive double digit EPS growth, book value per share growth, you know, driven by the higher net interest margin, you know, strong loan growth, strong growth and all these other products. So I think there's a number of lovers there. And then you get the multiple expansion on top of that. Usually I don't try to include a lot of multiple expansion in my underwriting. Usually just kind of looking at EPS growth. But here's a story where I think, you know,

in sleep degrees, that it's just undervalued relative to the quality of the company. So I think you're getting that double, double whammy there. So perfect. Do you want to talk about just generally for, you know, just the progressive First Republic, how you think about those versus other opportunity costs? Sure. So actually, so First Republic, I actually don't currently think is that attractive. I also occasionally will write up companies in the blog that are really high quality companies that I want to track over time and, you know, hopefully that the market will present a good opportunity. But that's just one of those really, really high quality, you know, bank compounders that's generated a ton of value

over time. And I think their playbook, I think, will continue for a long time. They're very small market share in the key markets that they're in. So, do you, First Republic, I'll just give a little anecdote. I used to be at one of the big private equity shops. And when I was very low level, First Republic comes in and they make an intro and they're like, hey, we want all of your business. We've got a strategic partnership with this. And, you know, now, now all the comp round of Burr's Republic. And I always think back to that. I was like, look, these guys, not that I was guaranteed to be a success or something, but they went to every person in this analyst class. And they knew, hey, get them while they're young. Like, this is like, and I hadn't seen, I haven't seen that

at any other, I haven't seen any other bank try that, you know, go to all the, you probably don't do Goldman because Goldman's got their own thing. But a McKinsey or the private equity, just go to them and say, yeah, right now we're not going to make a lot of money off you because you're a 25-year-old kid and you've got nothing, but you know, you've got the human capital invest with that. So I thought that was a really interesting thing. I've got a couple more questions, but I want to turn it over. I want to make sure, because there's two of you, so I'm bouncing back and forth. Anything you think we should have touched on that we haven't touched on yet, or you wish we had touched on a little harder. And, Leiden, I'll start with you and then we'll go to this leap.

Yeah, I guess the one thing I'd say about the current environment, the ally is benefiting in a few ways that we've talked about just in terms of, you know, higher used car prices. But they're also a number headwinds here. So one, if you look at new car volumes in the U.S., new car sales, they're actually not that high. They're pretty low right now. It's at about 13 million November. And pre-COVID, we're at 16, 17 million. So we're well below where we were pre-COVID in terms of new car sales. So as that normalizes, you know, some of the inventory and chip shortages, that'll be a benefit. And also, as we talked about, you know, they're lending to all these dealerships is way down because none of the dealers have any inventory. So they're actually, this is not the peak

environment for them by any means. That actually transitions nicely into one of the tail risks I wanted to talk about. So I'll just bring it up here if that's okay with you. 13 million new car sales. That's on the low end for historical. And I agree with you. But, you know, I think there's two things there. A, the rise of Uber and at some point, maybe 100 years from now, I don't know, but self-driving cars, you know, I do think car ownership comes down over time, and that can also transition into a very tail risk where, you know, I had the guy, I had Eric from Worm Capital, head of research on, he was talking about Tesla. And I know one of the things they think is all of the Tesla and EVs are coming so quickly that all of the legacy auto stuff is going to be stranded very quickly, you know, not tomorrow, but it will happen. And if all of the legacy auto is kind of stranded, and I'm talking about combustible vehicles, you know, four years from now, EVs are so good that combustible vehicle prices are plummeting. They're going to zero. You know, that could present a risk. So I guess the two things, let's start with the first one. What if you said 13 million is on the low

end? What if car ownership is actually trailing down because, you know, people can use cars a little bit longer because they're so much better now and people can Uber. So two car households become one car household. What if that's the case? I think that's fair, but I think that plays out over a long period of time. And we were just at 17 million pre-COVID. So, you know, maybe we'd be at 16 now or whatever. But 13 is very low historically. And we were at 16, 17 for years pre-COVID. So I don't necessarily think we go from like 17 to 13 or 12 overnight, you know, absent COVID. I think that that takes time because, you know, pre-COVID, Uber was still very positive. The Lyft was very popular.

And, you know, we're putting up 17 million, you know. So I think that takes time. And I think in terms of some of the other things, you know, Allies moving more and towards the used car market. And right now, EVs are only like 1% of the overall car fleet. They're tiny. Even because the life of a car is 15 plus years now. So it just takes a long time from the plate to turn over.

So Ally can do great, you know, in the used car market for a long period of time. Sleep, did you want to add anything to that? Yeah, because I think it's very important to make clear that that $13 million, it can be very misleading because it's not a demand problem at all. And we all know this, right, because there's a huge supply chain, specifically to the chip shortages that we're seeing in autos. But the demand of autos is through the roof. If you go to a dealer right now and you try to buy a car,

they'll tell you, yeah, you can buy it, but you'll have to wait nine months. And that's why most people are going out and buying used cars. And that's why used car prices are up, I don't know, 50, 70 percent through the year. So the demand is certainly there. It's just that we happen to have this kind of bottleneck at the moment. And yeah, I agree with Enlighten that, you know, this is certainly something to keep track of, but at least in my mind, it's kind of a five-plus year thing to, when it actually kind of starts to play out.

And we could see, you know, EVs and autonomous vehicles being a much bigger part of the total sales, but you'll still have a big fleet of existing cars that are going to be in the market. And even if prices fall down, like Ally will be lending towards whoever wants to be buying that and still driving, right? And tell me if I'm wrong here.

This is one of the things I was thinking about when I was thinking about this because I've got a lot more work to do on this, but I could see myself owning this one day. And one thing I think was, well, they are a bank holding company, right? And they do have, they've got relationships with consumers. They've got a deposit base. Like, this is not the ally of seven years ago where if car lending went to zero, they'd have no clue what to do because that's literally all they exist.

Like if car lending went to zero, yeah, they'd have a lot of capitals to deploy, but you're buying them for one times, one point one times book value, which technically book value should be what if you liquidated the whole company you could pay out. So, you know, and book value should grow because they're going to earn now. and they've got all these customer relationships, so they've got the deposits, they can go fund other loans and everything if they, are, am I thinking about that wrong? Or is that too soon? I mean, that's definitely, like that will be a crazy scenario if all of a sudden people

stop buying cars for whatever reason. But then, yeah, like essentially what would happen is these loans would get rolled off and just, you know, get paid down and turn into cash. And they, you know, theoretically, they can redeploy them into some of these other other products over time. And that's the other thing. They're diversifying away from this, right? Enlighten touched on this already. But as it stands, as it stands today, autos are, you know, autos, and that includes retail auto and commercial auto, et cetera, is 80% plus of the of their loan book, right? And, you know, over the next five years or so, that should probably be coming

down to 75 or 70. So over time, they're diversifying away from, from, from, that and they've been pretty transparent in the sense that they want to grow these other businesses to become a more diversified bank. And that's one of the reason why I think it trades at where it trades as a well. People look at their auto exposure. It would suck if the autos went away because as we discussed earlier, they have an advantage lending to the dealers and everything in there. But again, it's not the end of the world because they'd still have the advantage in their deposit bank. They could still find other stuff. Let's see. Yeah. Oh, and sleep. I gave in lighten the chance, I want to give you the chance.

Anything else you think we should have talked about with Allied that we didn't talk about or you wanted to hit a little bit harder or anything? Yeah, no, I remember one of the points you put out in your thread related to kind of Tesla owning their own, their own supply chain and vertical integration and the entire process. And I thought that that was a very, that was a very interesting question. I think it's, let me just for the listeners, the point was, you know, GM, they, don't own their dealerships, right? It's independent dealerships. In many states, I believe it's

actually illegal for a car dealer to try to, for a car company to try to operate a dealership. But Tesla has skirted those laws in those states, but Tesla, you go to a Tesla store, it's owned by Tesla. It's not an independent franchisee. So I was wondering, what if GM looks at the Tesla model says, that's way better than our model and eventually goes there. And sorry, just to give that background, please. Right. And this, I will say, this is in my mind a very hypothetical scenario, because I think we both know that the three of us know that these legacy auto OEMs are very slow in adapting and moving. And I think right now they've woken up to the fact of that EVs are, you know,

the new priority, et cetera. But I don't think they'd get into that anytime soon. And you're right that that I think it's actually in all states that the franchise has to be separate from the parent company. The reason why Tesla does it that way is because they have stores, but you can't buy a Tesla in a store. you have to buy it online. It's only really a showroom. So I don't think, I don't think GM or Ford will be able to pull that off either way. I'm going to look it up out of curiosity, but I remember

GM youth have their Saturn brand. And I think part of the pitch for the Saturn brand was GM owned like the Saturn locations and there was not a question. They argued it's a low cost model, but nobody should quote me on that. I'll look it up, but that's an interesting thought. Let's talk last thing. I want to talk end game. So I'll start with sleep and then I'm going to come to Enlighten with a slightly modified version of this. Sleep, you mentioned I can underwrite 20% IRAs over the next couple of years. So could you just walk me out like your base case? Five years from now, you and I, we've got a couple of extra gray hairs on our heads. We're filming a, we're filming a follow-up to this podcast. What does Ally look like in your base case? In the metaverse, right? Yeah.

Yeah. So, you know, in my in my mind, so if we think about the, the outlook that punishment has has given us in the medium term, it's basically mid to high 3% net interest margin and a 15% to 16% plus ROE. The reason why they have that plus is because of this recent credit card acquisition. But when I kind of run those numbers and see how realistic that can be, I actually think it's pretty conservative in terms of how we can see it play. it out. And again, just speaking to management track record, they've laid out all these different workloads going back in time, and they've basically hit all of them, you know, because it came from a low ROE, and over time, they just kept increasing as they executed on their plan. So, yeah,

in my base case, I have, you know, book value growing at mid-teens and ROEs stepping up over time to 17%, and, you know, I think by then, you know, you can probably, you don't even have to assume that much multiple expansion, call it, you know, 1-5-17, it doesn't even have to be like a two-time book value for you to get to that IRA. And that also assumes that they consistently buy back their shares at these very attractive prices. So obviously, you know, things can change and this, the share price can go up substantially and they wouldn't probably be as aggressive buying buying back that stock, but it's not, you know, that heavily dependent on that, on that either. And if anything, that gives them some extra cash to pursue other acquisitions or increase

their their loan exposure, et cetera. We lost in Leiden, apparently. Maybe he got so excited talking about 20% IRAC's disconnected. So I'll give you an Biden's question and he can add on. But my last question, you know, I look at LF Financial. I look at a online-only bank with lots of car relationships and everything. And we talked about how they're doing bolts on acquisitions. And I kind of wonder about the other way, right?

Does a aspiring fintech player with a massive multiple coming by these guys for the customer relationships and the deposit base or, you know, I know crypto is taking over the world. But if I was a crypto company with a big valuation, maybe I'm just too old school. But I'd look at this and say, oh, I could go buy a heck of a lot. lot of customer relationships. That deposit based, you know, a lot of crypto players are paying like 20% per day interest rates on some of their crypto stuff. I'm being a little hyperbolic, but that deposit base would look pretty attractive for funding. Now, I don't know how the regulators are going to like deposit banks funding crypto stuff. But, you know, do you think

there could be some strategic interest, whether it's from a Wells Fargo trying to spruce up their image and their online product or I don't know who else, but could there be strategic interest here? Yeah, I don't, I haven't, you know, given much. thought to an M&A scenario here in terms of them being being taken out. I think it's a very valid and interesting question. I think for a large bank, it would be probably hard to pull off, you know, especially like the top four or five that, you know, the JP Morgan's and Bank of America's and Wells of the world because they have such a big, you know, market. Oops. Hey, Sleep, you got muted for a second there. I think when in Lighten joined, I pressed the wrong button.

Sorry. This is going to be the goofiest podcast, last five minutes of podcasts I've had yet. It's all good. So, yeah, so I was saying, I think for one of the large banks to pull it off, it would probably be a little bit hard just because Ally, I mean, it's, it's $185 plus billion in acid. So it wouldn't look good on the kind of Fed. regulatory front. Yeah, exactly. But the fintech question is actually pretty interesting because if we look at some of the, you know, the underlying trends of some of these large fintech companies, I think a lot of them will end up turning into banks because at some point, and this is just a theory that I have, right, but I think we've seen some hints of this. I believe it's so far what was actually considering this and already did something like this turning into a bank holding company. But I could see.

a big, you know, valuation fintech kind of looking at some, at an asset like this as a way to kind of quickly turn into a bank and have the low cost, the busset base that would give them an additional advantage. So, I mean, I wouldn't, I wouldn't necessarily say that's a zero probability of any. There's probably some chances to that happening. We'll see. That was exactly that I was wondering. Enlighten just managed to rejoined us. And Lighten, I'll just give you the last kind of words here. We were talking about both endgame for Ally as a standalone and Sleep was kind of walking us through the math there. And then I asked him, this was going to be your question, but you disconnected. I asked him

about possible strategic interest in Ally, whether, you know, he said legacy banks probably can't buy them for regulatory reasons, which makes sort of sense. Or I mentioned fintech players with huge multiples might just look at their customer relationships in the POS space and say, that is a really good strategic asset. So I'll let you just kind of jam on those for a couple seconds. Sure, definitely. Yeah, I agree in terms of. of larger banks, you know, from a regulatory perspective, just not being able to buy ally. You know, I can't see like a JP Morgan or Bank of America being able to buy an ally that just would not, not fly from a regulatory perspective.

And then from a, you know, in terms of FinTech, I think it is interesting, you know, Sleep's comments there. I think Square now I think has a banking license. I could be wrong about that. But I know some of the FinTech players are, you know, getting banking licenses or certainly are partnering with banks for a variety of financial services. So it's certainly a possibility, but I also don't necessarily think a fintech player wants to acquire, you know, 100 billion dollars of auto loans, you know. I haven't studied the buy now, pay later people in death,

but I could see a buy now pay later guy saying, oh, these guys got deposits, which we can use to fund those buy now pay later loans. They've got those deposits. They've got huge customer relationships, which we can use to go push by now, pay later products. And we've got a massive multiple, which we can use to take them out. But I do agree with you there. And I just want to, because you disconnect for a few minutes, any last thoughts here before we wrap this up? No, I think we covered everything. Yeah. I mean, I think just, you know, overall in terms of the bold case, you know, continued strong EPS and tangible book value growth, multiple expansion here. And I think, you know, we've acknowledged some of the risks, but I don't really see.

them playing out in the next few years, three to five years. And the company continues to do a really good job diversifying its product portfolio, diversifying across, you know, both new and used car loans as well as across different OEMs. So, you know, I think that story continues to improve overall. So, yeah, we, you know, continue like the company, like the story. Perfect. Well, hey, I think we'll wrap it up here. But guys, you guys have both been on my wish list of people to get on the podcast. And I'm glad we could get you both on. We'll have to try and have you on individually at some point as well. Sleep, you owe me a music podcast at some point. Cool. For sure. But hey, for the listeners, Sleepwell Capital, Enlightened Capital, to great blogs.

They're going to be, I'm going to include Enlightens write-up on Ally. I believe Sleep has not done a write-up on Ally. So Enliens right-up on Ali will be there. And the science of hitting, friend of the podcast, he just did a great write-up on Alli on Monday. I'll include a link to his write-up as well if you want to learn a little bit more about the company. but sleep enlighten thank you guys so much for coming on and looking forward to the next time thank you andrew definitely thank you yeah thanks for having us