3 Potential Longs From AllianceBernstein's Top Buys, 1 To Avoid

by: Rash Menaria

AllianceBernstein LP is a U.S. based global asset management firm owned by AXA (OTCQX:AXAHY), a French insurance conglomerate. It has over $400 billion assets under management out of which ~$100 bn are deployed in equities. AllianceBernstein primarily follows a Growth at Reasonable Price (GARP) investment approach.For the growth strategy, AllianceBernstein evaluates both current and forecasted investment opportunities and conditions to identify companies with unanticipated growth prospects. From valuation perspective, it focuses on companies whose long-term earnings power and dividend-paying capability are not reflected in the stock's current price.

AllianceBerstein's picks may be useful for investors looking for reasonably price stocks with decent growth prospects in large cap space. Further, since its top buys represents stocks where it has highest conviction, it is a good starting point to screen for these stocks. The following is a list of AllianceBernstein's top buys in the December quarter as reported in their most recent 13F filing.



Shares Held as on 09/30/2011

Shares Held as on 12/31/2011

Change in shares

Pfizer Inc.





Micron Technology Inc.





Boeing Co.





CIT Group Inc.





Magna International Inc.





Seadrill Limited





Morgan Stanley





I like Boeing, Micron Technology and Pfizer the most among above stocks and would recommend going long on them. However, I would recommend avoiding Magna International.

Boeing Co. is the world's leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. It operates in the following segments: Commercial Airplanes, Boeing Defense, Space & Security, and Boeing Capital Corporation, which provides financial solutions facilitating sale and delivery of Boeing commercial and military aircraft, satellites, and launch vehicles.

Last month, BA reported impressive Q4 results with EPS of $1.32 comfortably beating the consensus estimates of $1.01. This performance was driven by strong sales in its Commercial segment and better margins from the Defense business. Balance sheet looks stable with debt remaining flat and free cash flow at $2.3 billion looks strong.

Looking forward, I believe Boeing has considerable upside potential due to strong volume growth visibility based on commercial airplane backlogs and production rates. Management spoke of continued strong demand for commercial aircraft. Healthy order tally along with strong cash flows are expected to drive up share prices in 2012.

Micron Technology, Inc. engages in the manufacture and marketing of semiconductor devices worldwide. It is a leading designer and producer of DRAM memory and NAND flash memory and offers foundry services for CMOS image sensors.

Micron recently highlighted that DRAM supply in 2012 should remain controlled as DRAM manufacturers cut their production levels and decreased the capex guidance. After the recent bottoming out of DRAM prices this should help improve prices. Improving HDD situation bolstering PC demand should also help DRAM prices. Demand for server DRAM also seems positive with improving trends in Cloud and Big Data/Fast Data. Further as DRAM industry consolidates after Elpida's bankruptcy, Micron would be in a strong position in DRAM market with above 25% market share.

Micron has increased its focus on NAND and SSD and is trying to increases its share in both consumers and enterprise market with new products and solutions. In addition MU's partnership with EMC Corporation (EMC) for the VFCache offers further growth potential for MU in enterprise SSD space. With its diversified business model, a string of new opportunities and DRAM recovery, there is enough upside potential in the near term for MU.

Pfizer is a research-based, global biopharmaceutical company. Pfizer's stock price has seen a good 20% appreciation in last 6 months, and I expect it to continue its upward trend going forward. I am bullish on Pfizer because of management's commitment to enhancing shareholder value through dividend and buybacks, and the company's improving product pipeline. Pfizer increased its quarterly dividend by 10% to $0.22 from $0.20 in Q4, and authorized an additional $10 billion share repurchase program with $5 billion in repo expected for 2012.

Pfizer is likely to generate ~$20B in free cash flow in 2012, so even with the dividend of ~$6.5B and share buyback of $5B, there is still plenty of room for inorganic growth through M&A. In addition, Pfizer entering an interesting new product launch cycle with four $1 bn-plus opportunities including Xalkori, Eliquis, tofacitinib, and Prevnar 13 adult, which could provide organic growth catalysts for the company.

Magna International Inc. operates as an automotive supplier in North America, Europe, and internationally. The company designs, develops, and manufactures automotive systems, assemblies, and modules and components, as well as engineers and assembles vehicles primarily for sale to original equipment manufacturers of cars and light trucks.

Recently, Magna gave a flat sales guidance for 2012. Its North American revenues are expected to be flat due to unfavorable mix from lower Detroit 3 production volumes and recovering production at Japanese manufacturers following supply disruptions in 2011. While Europe represents better opportunities, expected decline in production volumes and foreign exchange headwinds mean slower pace of margin improvement. All these factors suggest a weak near term revenues growth and margin outlook. The stock has rallied 45% in last two months and I believe it is prudent to book profits at these levels.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.