If you invest in Exchange Traded Funds (ETFs), mutual funds, or have a pension, it is very possible that you have invested in a Blackrock Inc (BLK) product. Blackrock is an investment manager based in the U.S. that makes investments all over the globe. They create and manage ETFs, mutual funds, hedge funds and other investment vehicles. Blackrock caters to all areas of investors including the individual investor, pension funds, insurance companies, charities and foundations, governments and even sovereign wealth funds. If there is an area you want to invest in, Blackrock has you covered. They invest in stocks, bonds (corporate and municipal), currencies, real estate and commodities among other areas.
Blackrock primarily makes its money charging a fee based on the value of its funds. The larger the fund balance, the bigger the fee they make. When stock and other investments rise, the fee is bigger. When these investments fall as they have been most of this year, the fee income is smaller. BLK’s stock price has hit a 52-week high of $933.06 and has dropped as low as $503.12. Recently the stock price was about $713, in the middle of the 52-week range. Morningstar gives Blackrock 3 stars out of 5 and has a fair value of $760.00 per share for the stock price. Yahoo Finance is less bullish and has a price target of $648.08 on the stock.
Blackrock has a P/E ratio of 19.72, which is slightly below the market average. They pay an annual dividend of $19.52 which gives them an annual dividend yield of 2.73%. Blackrock did raise their dividend the first quarter of this year and are expected to do the same next year. Over the last 5 years, Blackrock has raised their dividend an average of 12.6% per year. Their dividend yield is also higher than their 5-year average dividend yield of 2.38%. This is one metric used to determine if the stock price is in value territory or not. If the current yield is higher than the 5-year average, that is a good sign the stock price may be a good value.
At a market cap (number of shares x price per share) of $108.68 billion, Blackrock is the largest player in the investment manager space. The closest competitor, Blackstone, comes in at $62.46 billion. Blackrock is almost four times as large as T Rowe Price and almost 5 times the size of Principal Financial Group. This size gives Blackrock access to deals and customers and products that may not be available to their smaller competitors.
According to Morningstar, Blackrock has some upside potential. If the market gets comfortable with the rate increases and decides the U.S. can avoid a recession next year, it should increase. With an increase in the investment markets, Blackrock will earn more revenue from fees. If that happens, maybe they can reach their fair value that Morningstar calculated.
As always, do your own due diligence. I do not own shares of Blackrock at this time. Sources include Morningstar, Schwab, Gurufocus and Yahoo Finance.
(Intentional Investing is a weekly column written by Kyle Smith from Floyd County, TX, based upon his investment knowledge and does not represent the views or opinions of the Floyd County Record. You can reach Mr. Smith via email at insureddividends@gmail.com)
