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Hedge Funds Are Betting On AllianceBernstein Holding LP (AB)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

AllianceBernstein Holding LP (NYSE:AB) was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. AB has experienced an increase in support from the world’s most successful money managers in recent months. There were 8 hedge funds in our database with AB holdings at the end of the previous quarter. At the end of this article we will also compare AB to other stocks including Rexnord Corp (NYSE:RXN), Pampa Energia S.A. (ADR) (NYSE:PAM), and BancorpSouth, Inc. (NYSE:BXS) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How are hedge funds trading AllianceBernstein Holding LP (NYSE:AB)?

Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 13% from the second quarter of 2016. By comparison, 10 hedge funds held shares or bullish call options in AB heading into this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

HedgeFundSentimentChart

When looking at the institutional investors followed by Insider Monkey, Chuck Royce of Royce & Associates holds the most valuable position in AllianceBernstein Holding LP (NYSE:AB). Royce & Associates has a $10.1 million position in the stock. The second largest stake is held by Mario Gabelli of GAMCO Investors, with a $5.6 million position. Some other hedge funds and institutional investors that hold long positions comprise Sharif Siddiqui’s Alpenglow Capital, and Jim Simons’ Renaissance Technologies, which is one of the largest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, some big names have been driving this bullishness. Alpenglow Capital assembled the largest position in AllianceBernstein Holding LP (NYSE:AB) which had $5.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to AllianceBernstein Holding LP (NYSE:AB). These stocks are Rexnord Corp (NYSE:RXN), Pampa Energia S.A. (ADR) (NYSE:PAM), BancorpSouth, Inc. (NYSE:BXS), and Cousins Properties Inc (NYSE:CUZ). This group of stocks’ market caps are closest to AB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RXN 16 191629 -3
PAM 17 284757 -1
BXS 13 179968 -1
CUZ 9 31877 -6

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $30 million in AB’s case. Pampa Energia S.A. (ADR) (NYSE:PAM) is the most popular stock in this table. On the other hand Cousins Properties Inc (NYSE:CUZ) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks AllianceBernstein Holding LP (NYSE:AB) is even less popular than CUZ. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None

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