BlackRock: A Rock-Solid Stock Pick
Since going public at $14 in October 1999, BlackRock (symbol BLK) has been a winner. The stock, which closed at $155 on July 9, has delivered an annualized return (including dividends) of 26.3% since its debut. The terrific performance reflects BlackRock's prodigious growth -- assets under management have climbed 34% a year over the past decade.
BlackRock is well diversified. The firm has 46% of its $3.4 trillion in assets in stock or balanced products, 32% in bond funds and 10% in money-market or similar products. This means that BlackRock can hold on to assets better than many when, say, investors get skittish and move their money from stocks into bonds and cash. The firm has customers all around the globe. And its broad mix of actively managed and indexed products should allow the firm to keep up with investor tastes. Thanks to the acquisition of the iShares brand in 2009, BlackRock is now the biggest provider of exchange-traded funds.
In addition to its core business, BlackRock licenses its proprietary risk-management technology, called Aladdin, to firms that want to monitor investments or assets. Some $9 trillion of assets, in addition to the money that BlackRock itself runs, are on the platform. This business accounted for just 10% of revenues in 2009, but growth prospects are excellent as investors focus more on risk.
Because of BlackRock's heady growth, its stock has historically commanded a higher price-earnings ratio than most asset managers, says Gabelli & Co. analyst Mac Sykes. Analysts expect earnings to grow 15% annually over the next few years, and the stock sells for 16 times estimated 2010 profits of $9.93 per share. Sykes thinks the shares can reach $230 in a year.