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High Yields from High Net Worth Clients

02/17/2015 7:00 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Based in New York, this new recommendation is a leading global money manager offering mutual funds, structured products, and managed accounts to corporations, endowments, institutions, and government agencies, explains Mark Skousen, editor of High-Income Alert.

AllianceBernstein (AB) is ranked among the world’s top money managers, specializing in fixed income, equities, and alternative assets. It operates in 22 countries, has more than 85,000 high net worth clients, and manages more than $474 billion.

In addition to managing money, AllianceBernstein hauls in millions of dollars each year by selling fundamental research, quantitative analysis, economic reports, and sell-side recommendations.

The money management business is one of the world’s most lucrative. Management fees pile up quarter after quarter. As asset values rise—as they have for six consecutive years—so do revenues, operating margins, and net income.

To boost earnings further, AllianceBernstein recently opened a new derivatives trading operation with five top veterans from rival firms.

As you might expect in a roaring bull market, earnings here have been exceptional.

In the most recent quarter, net income soared 50% on a 45% increase in revenue. Profit margins are an almost unbelievable 89%. (I told you this was a great business.) And AllianceBernstein is debt free.

I estimate that the company earned $1.79 a share in 2014 and earnings will top $2 a share this year. Yet the stock is cheap at less than 13 times trailing earnings.

Of course, we always insist on getting paid while we wait. Our investment in AllianceBernstein will be no exception.

The stock currently yields 7.5% and that dividend is likely to rise along with earnings in the months ahead. So buy AllianceBerstein at market. And place a protective stop at $19.

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