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BlackRock Has the Wind at its Back With ETFs

Stock (Symbol)

BlackRock (BLK)

Stock Price

$426

Sector
Financial
Data is as of
August 2, 2017
Expected to Report
Oct 16
Company Description
BlackRock, Inc. (BlackRock) is an independent investment management firm. Its product range includes single- and multi-asset class portfolios investing in equities, fixed income, alternatives and/or money market instruments. Source: Thomson Financial
Sharek’s Take
David SharekBlackRock (BLK) continues to navigate towards passive investments. Over the last year BLK has had $12 billion in inflows into actively managed funds and $114 billion into index funds, including BlackRock’s ever-popular iShares. So the company is seeing the marketplace and responding by overhauling its stock-picking business in an effort that has included layoffs, pricing changes and a greater emphasis on computer models that inform investments. BlackRock is the world’s largest asset manager. Half of assets under management are in stocks, with a qtr in bonds and the remainder in multi-assets, alternatives and cash. It has half the $600 billion in fixed income ETF market. In asset style, BlackRock assets are evenly divided between active management, index funds, and ETFs — which means 2/3rds of assets are passive investments with no money manager needed. Thus, investors are wanting low-cost investments and BlackRock is evolving to fill that need. This stock has an Estimated Long-Term Growth Rate of 14% per year in addition to yield close to 3% ($10 in dividends per year). Management is on track to buy back $1 billion in stock this year, which on an annualized basis is around 1.5% of BLK’s market cap. The stock’s P/E is 19 which is my Fair ValueBlackRock is a safe, sound stock that’s capable of double-digit growth plus a nice yield. The company is paying $10 in annual dividends when it’s making around $20 in profits — those are big numbers.  With investors flocking to index funds, BLK has the wind at its back.
One Year Chart
Profit growth clocked in at a respectable 10% last qtr, yet missed estimates of 11%. Sales increased 6%. Qtrly profit growth Estimates are 7%, 14%, 22% and 19% for the next 4 qtrs. That’s very optimistic. The Est. LTG of 14% plus the 3% yield is good for a conservative stock such as this, but I kinda consider this stock to be a 10% grower, both profitwise and stockwise. The P/E of 19 is reasonable.
Fair Value
My Fair Value on BlackRock is 19x earnings, which is a little lower than the recent quote. But BLK does have good profit growth Estimates for the next 4 qtrs so I wouldn’t exactly be a seller here.
Bottom Line
BlackRock was a great stock more than a decade ago as it was delivering 20% profit and stock growth. Now the growth rate has slowed, but this is still a good investment (and a more conservative one). Overall this company is in the right place with its iShares ETFs and index funds. BLK ranks 10th of 31 stocks in the Conservative Growth Portfolio Power Rankings.  
Power Rankings
Growth Stock Portfolio

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Aggressive Growth Portfolio

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Conservative Stock Portfolio

10 of 31

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