Seeking Alpha: Market Headwinds Slow The Progress At AllianceBernstein

There's a good potential turnaround story at AllianceBernstein L.P. (NYSE:AB), but it is going to take a cooperative market environment and that hasn't been the case lately. The shares have taken a dive since my last update, along with peers like Franklin Resources (NYSE:BEN), Invesco (NYSE:IVZ), Legg Mason (NYSE:LM), and Janus (NYSE:JNS), as market conditions have made it noticeably harder to gather and retain the assets under management (AUM) that fuels the fee-generating model.

AllianceBernstein hasn't made the progress with AUM accumulation or margins that I had hoped for a year ago, but there's still upside here. If management can leverage relatively good actively-managed fund performance into improved AUM, margin leverage could be significant. That said, investors can't afford not to consider the risks that the margin leverage fails to materialize and the company never truly manages to harmonize the Alliance and Bernstein businesses. I still believe that a fair value in the mid-to-high $20s is in play, along with a rich tax-advantaged distribution, but asset managers need relatively healthy markets to make headway.

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Market Headwinds Slow The Progress At AllianceBernstein

Seeking Alpha: Forget Turning Around, AllianceBernstein Is Growing

Turnarounds can be powerful drivers for higher stock prices, but the real winners are the companies that not only pull out of the dive but actually start gaining altitude again. I think AllianceBernstein (NYSE:AB) very much belongs in that group, as the company has being doing a good job of driving improved asset flows and generating better margins from its cost base. Better still, management is thinking growth again (and delivering), with expanding platforms in index, asset allocation, and alternative investments offering more margin leverage as the flows materialize.

AllianceBernstein shares are up about 20% from when I last wrote, doing better than rivals like Invesco (NYSE:IVZ), BlackRock (NYSE:BLK), Franklin Resources (NYSE:BEN), and Legg Mason (NYSE:LM) before considering the significant yield here. I think that AB has a good chance of generating 10% annualized earnings growth between 2014 and 2019, and discounting that back gives me a fair value of about $34.50 today.

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Forget Turning Around, AllianceBernstein Is Growing

Seeking Alpha: AllianceBernstein Looking Stronger, With More To Come

I kinda/sorta liked AllianceBernstein Holding LP (NYSE:AB) at the start of this year, thinking that investors could collect a solid tax-advantaged yield while waiting to see if management's turnaround and self-improvement efforts would really lead to better results. I won't pretend, then, that I saw the 20% year-to-date move coming, nor the significant improvements in fund inflows.

That's what has come to pass, though, and now I find myself seriously rethinking what AllianceBernstein's earnings progression can look like with lower legacy attrition, solid inflows, and significant operating leverage. I'm concerned that I may be overcorrecting because of just a couple of good quarters, but I'm starting to think that a high-$20s to low $30s fair value may not be so ridiculous, though the risks of a sharp market correction and/or higher rates are quite real.

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AllianceBernstein Looking Stronger, With More To Come

Investopedia: AllianceBernstein Could Be Looking At A Long Turnaround

Reputation is a critical asset for asset management companies, and a few years of bad performance can take a very long time to reverse. That's one of the key challenges for AllianceBernstein Holding L.P. (NYSE:AB), as this partnership is seeing ongoing outflows fueled by underwhelming fund performance. While these shares do offer a high yield and performance could improve if higher rates drive investors back into equity funds, the poor performance and rankings of the company's funds will likely weigh on results for some time.

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http://stocks.investopedia.com/stock-analysis/2012/AllianceBernstein-Could-Be-Looking-At-A-Long-Turnaround-AB-BEN-JNS-TROW0621.aspx

Investopedia: Questions Of Success And Value At Charles Schwab

It is an unfortunate reality of investing that figuring out whether a company is top-notch is not especially helpful in figuring out whether the stock is a top candidate to buy. True, it often makes sense to own the best businesses that you can find, but the metrics that mark quality and value are not the same. 

In the case of Charles Schwab (Nasdaq:SCHW) it is not hard to argue that this is one of the best brokerage and financial service companies out there. The trick, though, is in figuring out what that quality is worth and the probable path of earnings and cash flow in the coming years. As a growth stock, it looks intriguing, but a return-to-equity valuation shows a different sort of story. 


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http://stocks.investopedia.com/stock-analysis/2011/Questions-Of-Success-And-Value-At-Charles-Schwab-SCHW-AMTD-ETFC-TROW-BEN-BLK-IVZ-WDST0720.aspx