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Dr. Paul Price
Dr. Paul Price
Articles  | Author's Website |

Alliance Bernstein L.P. – Up from the depths but still worth buying.

November 05, 2009 | About:
AllianceBernstein Holding L.P. is a limited partnership company. They provide research, diversified investment management and related services globally to a range of clients. Its principal services include Institutional Investment Services, Retail Services, Private Client Services and Institutional Research Services. Clients include institutions such as corporate and public employee pensions, endowments and governments. AB also serves various retail clients; private clients, trusts, estates, partnerships, and other entities. They also provide distribution, shareholder servicing, etc. to its sponsored mutual funds.

Both the profits and unit price of AB went way down last fall and winter along with the general market. Fundamentals dictated a drop but the extent appears to have grossly overshot to the downside. Alliance Bernstein units peaked at $94.90 in early 2007 and fell as low as $10.10 at the nadir last March.

Earnings troughed in the March quarter but have recovered steadily since then. Q1 came in at $0.07, Q2 at $0.41 and the recently reported Q3 picked up to $0.67. Full year 2009 estimates have risen over the past month from $1.38 to $1.70 while analysts are now at $2.05 for 2010 versus a month-ago expectation of just $1.71.

The units have surged along with the earnings upgrades. AB has climbed back to $26.02 right now and that is after going ex-dividend for a $0.67 quarterly distribution today.

Here are the per unit figures for AB as reported by Value Line:



Year


Sales


C/F


EPS


Distrib.


Dist/C-F


Avg. P/E


Range


2000


10.21


4.10


3.12


3.18


89%


14.4x


29.30-56.70


2001


12.03


4.96


2.77


2.84


89%


17.8x


37.40-59.30


2002


10.96


3.72


2.19


2.30


104%


16.9x


23.20-50.80


2003


10.87


4.04


2.12


1.97


92%


15.6x


25.80-39.30


2004


11.92


4.17


2.43


1.19


54%


14.9x


31.50-42.30


2005


12.72


4.51


3.02


2.80


92%


15.7x


40.20-58.50


2006


15.25


5.24


3.82


3.56


93%


17.7x


55.40-82.90


2007


17.38


5.79


4.33


4.75


108%


19.8x


71.30-94.90


2008


13.33


4.10


2.79


3.45


122%


17.6x


11.50-78.00


As a master limited partnership Alliance Bernstein must pay out the bulk of its profits to its unit holders as cash distributions. Over the past decade AB has paid out $27.48 per unit (including 2009’s declared $1.44) for an average annual distribution of $2.745 /unit.

That period from 2000 through 2009 includes the NASDAQ bust of 2000, the extreme bear market of 2002 as well as the 2008-2009 melt-down. It includes the boom years of 2003 and 2005 – 2007. As such I feel it represents a pretty good indication of what investors can expect over a full cycle or two of ‘normalized’ market action.

At the current price of $26.02 that average annual $2.74 distribution would equal about a 9.5% yield. That’s quite attractive in today’s low interest rate world.

The chart above shows that the average annual P/E for AB was 16.7x over the 9-year period 2000 – 2008. A return to even a 16 multiple on year-ahead estimates of $2.05 would bring AB units back to $32.80 or up 26% from the current quote. Add in the nice quarterly distributions and you have the recipe for a very nice total return play.

Is $32.80 a rational target? I’d say it’s probably too conservative based on the past trading history for AB. Take a peek at the high end pricing from the ’52-week range’ box on the table above to see where AB has typical gone during boom times.

The balance sheet is in good shape with total debt about half of net cash on hand and no maturities coming due anytime soon. Long-term debt equals less than 10% of capital.



Summary: Alliance Bernstein units are good-yielding and moderately priced. Total annual returns could easily exceed 30% based on today’s estimates and could easily be better than that if markets continue to improve over time.



Disclosure: Author is long AB units and short AB puts.

About the author:

Dr. Paul Price
http://www.RealMoneyPro.com

https://seekingalpha.com/account/research/subscribe?slug=arrow-loop-research

Visit Dr. Paul Price's Website


Rating: 2.4/5 (7 votes)

Comments

billspetrino
Billspetrino - 9 years ago    Report SPAM


Paul I remember that this stock was written up originally in March of 2008 . 3 questions 1)Does Axa still owna large percentage of these units like they did?

2) are the distributions in jeopardy given that in 2007 and 2008 they distributed more than the cash flow

3) isn't the PE kinda high in this low PE enviornment?

peace

Dr. Paul Price
Dr. Paul Price - 9 years ago    Report SPAM









November 12, 2009 (FinancialWire) (Investrend Research Syndicate) --ValuEngine, Inc. has upgraded AllianceBernstein Holding Lp (NYSE: AB) to a "5" rating, the service's highest.


The ValuEngine Rating is an overall assessment of a stock's attractiveness. It combines the following five factors: ValuEngine's proprietary valuation, risk-return tradeoff, momentum, market capitalization and ValuEngine's proprietary forecasted one-month return. Approximately 80 to 85 companies achieve this highest ValuEngine rating out of VE's total coverage of over 5,000 publicly traded companies.


ValuEngine is a subscription-based business intelligence, market and equity analysis firm that provides exclusive, customized research and analysis solutions directly to companies, investors, investment banks and broker-dealers.
James Nyka
James Nyka - 9 years ago    Report SPAM


I'm impressed with this in-depth analysis, so impressed that on Monday a.m.I'm selling 800 shares of the long-dormant BK, and buying 800 AB. Not bad for one who considers himself ultra-conservative with regards to the vascillating market.

Please leave your comment:


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