Steady As She Goes For AllianceBernstein

A key part of the AllianceBernstein Holding LP (AB) story, and one that I've been saying for a while has been undervalued by the market, is the extent to which the company can unlock the benefits of prior investments in distribution platforms to generate better margins on rising AUMs. That story continues to work out, helping drive these units about 25% higher over the past year and 10% higher since my last update, all while paying an attractive tax-advantaged distribution.

I continue to believe that AllianceBernstein is a worthwhile holding to consider for investors who want a return story that skews toward the income side (and for whom an LP makes sense). The improvements in the company's equity funds is driving better asset growth and the company's overall strategy to drive more retail AUM still has room to run. Meanwhile, the expense benefits of shifting back-office operations out of New York City won't really show for several years, and can drive another leg of margin improvement. With a fair value in the low-to-mid $30s, I believe these shares continue to hold appeal for those willing and able to own an LP.

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Steady As She Goes For AllianceBernstein

AXA's Accelerated Transformation Carries Bigger Risks

France's AXA (OTCQX:AXAHY) has never been afraid to do things its own way, and the company's past efforts to shift away from more capital-intensive savings-oriented life products in favor of protection-oriented products made it an early mover in what proved to be a sound strategic shift. More recently, management has been working to strip administrative costs out of operations, grow its P&C and health insurance products, shift more capital towards faster-growing regions like Asia, and begin selling down its U.S. operations. The biggest move, though, has also been the most controversial - the $15 billion-plus acquisition of XL Group (XL).

I don't fault the reasoning for making a large acquisition in P&C insurance/reinsurance, and I can see the positive leverage opportunities in acquiring a Bermuda-based reinsurer like XL Group. I'm not sure this was the right company, though, and I think at least some of the share price weakness has been a reasonable reaction to those concerns. While AXA does appear to trade at a double-digit discount to fair value, I'd just as soon own a company like Prudential plc (PUK) or Aviva (OTCPK:AVVIY) at this point.

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AXA's Accelerated Transformation Carries Bigger Risks