Almost four years ago, I told InvestorPlace readers that Blackrock (NYSE:BLK) was “the best investment of the 21st century.” Today, I continue to stand by BLK stock.
Blackrock was founded in 1988 and went public in 1999. If you get it confused with the Blackstone Group (NYSE:BX), it’s no coincidence. Blackstone money founded Blackrock, with the two firms separating in 1995.
As Goldman Sachs (NYSE:GS) represented our old financial overlords, Blackstone represents the new ones. Two of its executives will have top jobs in President-elect Joe Biden’s administration.
Meanwhile, Blackrock shares are up nearly 80% since my 2017 story came out. They closed Dec. 4 at $703.47 with a market capitalization of $109 billion and a pricey (for the banking sector) price-to-earnings ratio of 23. It’s fully justified.
Serving the Rich
The price is high because Blackrock isn’t a bank. It’s an investment advisor, helping institutions invest across a broad range of asset classes, public and private. It’s best known for its exchange-traded funds (ETFs), iShares. It had about $7.4 trillion in assets under management at the end of last year. That’s more than twice the assets controlled by J.P. Morgan Chase (NYSE:JPM). Blackrock is the world’s biggest shadow bank.
That may be why Biden brought Blackrock executives Brian Deese and Wally Adeyemo in. Deese will run the National Economic Council. Adeyemo will be the top lieutenant to Treasury Secretary Janet Yellen.
After Biden’s victory became clear, Blackrock CEO Larry Fink was among the first to reassure investors of the new administration’s moderate intentions.
BLK Stock: The Original Fintech
I like to think of Blackrock as the original fintech.
Its ETFs are run passively, through algorithms. Its portfolio management system, Aladdin, is thoroughly automated. It has spun out other software like iRetire, a retirement planning tool.
Blackrock continues to acquire smaller fintechs. Just last month it bought Aperio for $1.05 billion, which helps wealth managers handle multiple tax-advantaged accounts for rich families.
That means Blackrock can run with fewer employees, just 16,600 currently. That’s roughly half the number at Goldman Sachs, and a fraction of the more than 256,000 at J.P. Morgan Chase. Blackrock is a perfect example of what Moore’s Law does. It creates efficiency, it cuts costs and it reduces headcount.
The New Boss
Deese had been Blackrock’s head of sustainable investing. No surprise, then, that he’s leaving behind a new software tool: Aladdin Climate. It’s another plug-in to the portfolio management system. It assesses the climate risks of investments, using public and private data.
This follows an annual letter from CEO Fink, stating that “climate risk is investment risk.” Fink is also calling for more transparency and disclosures to shareholders, which may surprise those who see the “shadow banking system” as a school of sharks.
Fink is also big on Bitcoin, believing it can evolve into a global asset and make the U.S. dollar less relevant. This will cheer Bitcoin bulls who have recently bid the cryptocurrency up to almost $19,000 with a market cap of $350 billion. That’s just $27 billion short of J.P. Morgan Chase.
The Bottom Line
Conservative investors should prefer Blackrock stock to Bitcoin, or any of the big banks.
You’re getting a dividend yielding 2%, and you’re on top of the biggest trends in the investment world, shadow banking and fintech.
BLK stock won’t make you rich, as it would have if you had gotten in early. Its aim is to keep you rich, or at least comfortable. While critics focus on the ultra-wealthy, there are millions of upper-middle-class people below them whose stock gains of the last decade now offer gold-plated retirements.
If, that is, we can keep the money.
Blackstone’s job is to help us keep it.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.
