Earnings updates (AB, GGG)

Another icky day in the market thanks most likely to liquidity concerns in the bond world and fears that private equity is "over". The Secular Value investor outperformed again -- only down 1.83% vs. the S&P 500's -2.33%.

That was partly due to lucky timing -- the portfolio actually had 2 stocks that were up yesterday -- GGG which had better than expected earnings and ILMN which went up for a second day on the strength of their earnings. Several of the low beta stocks continued to do their job by not going down nearly as much as the market. That's the key to this game -- diversification. Make sure you are diversified enough to survive the down days so that you are still around for the rebound.

GGG's earnings weren't great -- they showed organic revenue growth of 1% year to date but they weren't bad either. Key points were improved cash flow, industrial sales rebounded and unless I'm mistaken the contractor business in the US did not get any worse. Improved cash flow means earnings quality improved and suggests the pressures on the business from the US housing slump are no longer getting worse. The stock popped 6% or so mostly on relief and short covering. I would not expect the stock to break out of its trading range on these results -- though I would certainly appreciate it if the stock did!

AB's earnings were strong -- 1.16 vs. consensus at 1.08. They also raised the range of expected earnings for the year to $4.90 to $5.25 with almost $2 of that coming in the 4th quarter. Hedge fund assets are up 45% year to date to $10.5 billion -- that's mostly high net worth money right now and it bodes well for performance fees in Q4. They plan to start selling hedege fund services to their institutional clients -- that could really raise some money and grow management/incentive fees since they have $500 billion in existing institutional assets under management vs. only $106 billion in high net worth assets. Even if the growth in hedge fund assets comes entirely from existing money under management, the higher fees for the hedge fund services would make that a great deal for AB.

I will have more to say on the markets this weekend.