When it comes to getting involved in the world of private equity investments, institutional advisory services and fund creation, it is difficult to make comparisons to BlackRock, Inc. (NYSE:BLK).
BlackRock caters to everyone: institutional, intermediary, corporate, public, unions, industry pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities, sovereign wealth funds, corporations, official institutions, banks and individual investors. You name it, BlackRock serves it.
BlackRock generates revenues by managing equity, fixed income, and balanced portfolios. It manages (and creates) both CEFs and mutual funds, as well as offshore funds, unit trusts, alternative investment vehicles, currency, commodity, multi-asset ETFs, and hedge funds.
BLK also invests directly in all of these markets itself, as well as in municipal securities, government securities, corporate bonds and asset-backed and mortgage-backed securities.
It also provides global risk management and advisory services.
Its client mix is about 63% institutional. 50% of its asset base is involved in equities with 30% in fixed income, and 28% of its asset base consists of its iShares ETF products. It actively manages about 26% of its assets, and two-thirds of its asset base is in the Americas.
Next to Goldman Sachs Group Inc (NYSE:GS), I can’t think of a better firm.
How big is BlackRock? It has almost $6.3 trillion under management.
After going public near the top of the dot-com bubble, BlackRock stock has now returned about 40 times its initial IPO price. As opposed to many financial firms whose growth can be erratic, BlackRock enjoys ongoing linear and year-over-year growth. Operating income in Q4 of 2017 grew an astonishing 22% to $1.49 billion. Net income grew from $852 million to $1.022 billion, up 20%.
This came on pretty terrific metrics in almost all categories. Base fees not including securities lending rose 17% YOY. Securities lending was up 9%. Performance fees exploded 121%. Technology and risk management revenue grew 15%. Total revenue came to $3.47 billion.
How strong has BlackRock’s performance been? Revenue hit $12.5 billion, up from $9.1 billion in 2011. In six years, then, revenues have increased almost 40%. Net income rose from $2.3 billion to $3.72 billion, an increase of nearly 62%. That’s incredible.
BLK has also been spectacularly consistent in returning capital to shareholders. It increased its dividend in 2017 from $2.29 to $2.50 per share, almost 10%. It has repurchased exactly $275 million in shares every quarter going back at least two years.
Bottom Line on BlackRock Stock
So does BlackRock stock have a place in your portfolio? I think you probably want to own one of the leading investment firms. In many ways, there are similarities across them. None of them offer massive dividend payouts, so that’s kind of a wash.
But the thing that is most compelling is that BLK stock returns have destroyed all competitors. That 40-fold increase blows away Goldman’s four-bagger.
Safe to say, then, that BlackRock stock is the better choice. You want to own one of these big players because they are as entrenched and close to the market as you’ll ever get. You can actually invest in the big boys of investment and take advantage of their experience.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance, and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.