Kass Katch: Buying Alliance Bernstein

This blog post originally appeared on RealMoney Silver on May 2 at 7:43 a.m. EDT.

Forecasting the general direction of stocks is a tricky proposition in here, particularly in light of the vicious group rotation. What I do know is that the laggard consumer discretionary and financials are now being joined by transports and tech on the upside and appear to be breaking out to recovery highs as money shifts out of the former leaders (dot.corn, ag/fertilizer, materials, infrastructure, energy). Whether this is a broadening process, implying more upside, is subject to debate, but I will be watching the volume, breadth and sentiment for clues.

Yesterday, I was forced to cover a few shorts as I was premature in expanding the size of my short book -- and in light of the overriding notion that discipline should trump conviction.

I do believe the financial sector has some upside left, and, reflecting that, I have no financial shorts left at this time. In fact, I am in general agreement with Jim "El Capitan" Cramer that:

1. the financials have the best charts extant; and

2. for long-term investors, selected financial shares (and their franchises) are now available on the cheap.

As my regular readers know, I recently purchased a long position in Citigroup C. Now, I have also initiated a long in AllianceBernstein AB. This leading asset manager is structured as a master limited partnership. As such, the company enjoys a low tax rate and distributes most of its cash flow in the form of a dividend, with a current yield at 5.4%. With nearly $800 billion in assets, of which only $10 billion are hedge fund assets, AllianceBernstein's market cap is about $5.5 billion, which is low when one considers the to the fact that Alliance purchased Sanford C. Bernstein in mid 2000 for $3.5 billion ($1.47 billion in cash and the balance in stock).