Kass Katch: Buying Alliance Bernstein

I consider AllianceBernstein as a levered proxy to the capital markets, and, prior to my purchase of these shares (coincident with the bear market correction), AllianceBernstein's common had dropped from $92 to $60. I purchased AllianceBernstein at a large valuation discount to its peers, and, over the last month, the shares have dramatically underperformed industry leader T. Rowe Price Group TROW, which has tacked on 10 quick points in the last week or so. Just look at this chart, which compares the one-year share prices of T. Rowe to AllianceBernstein.

AllianceBernstein reported first-quarter 2008 results that were a few pennies below expectations, but normalized for an unrealized mark-to-market loss on the company's deferred comp pool (a loss of 13 cents per share) and an arbitration award (a loss of 4 cents per share) that will likely be recaptured in insurance, the results actually exceeded expectations. What I liked about the quarterly report is that net flows were better than expected and that expense control was excellent and should produce leveraged profit results if the capital markets stabilize/improve. What I didn't like about the quarter is that its strategies continue to trail its peers -- though Chairman Sanders said on the conference call that April returns beat benchmarks -- but, since AllianceBernsten is more of a value buyer, they tend to be early.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.