BlackRock’s an Overlooked Gem, Fair Value $195

by Michael Foster
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BlackRock (NYSE:BLK) is a silent giant of the finance industry with its hands in a lot of different pots. With annual revenue easily over $8 billion and holdings worth nearly $200 billion, the firm is a significant player in a variety of markets. Since 2009, it is the largest investment manager in the world with over $3 trillion of assets under its purview. [1] Despite its massive size, the firm is nowhere near as familiar as household banks like Wells Fargo (NYSE:WF) and Bank of America (NYSE:BAC). Even smaller players such as Goldman Sachs (NYSE:GS) have become famous–or infamous–since the subprime mortgage crisis, while BlackRock remains under the radar.

Hard as a BlackRock

This is partly because BlackRock didn’t require bailouts during the fallout of 2008-2009. On the contrary, the firm was retained by the Federal Reserve Bank of New York to liquidate assets once held by AIG (NYSE:AIG), and the firm’s stock quick rebounded before the end of 2009 to above its pre-crisis high of $219.32.

While the firm’s current market price is well below its peak, the firm has plenty of room to grow. The firm’s diverse investment strategy and wise choices in recent years have boosted its revenue and promise to offer high growth potential in the long term.

The market confirmed the firm’s strong growth and reliability in April this year when BlackRock replaced Genzyme as one of the S&P 500. [2]

The BlackRock Strategy

BlackRock has made a number of wise bets in the past decade. For example, the firm is the largest shareholder of Apple (NASDAQ:AAPL), and has benefited from the firm’s explosive growth in consumer electronics markets. Never complacent, the company constantly reevaluates its market exposure and reacts nimbly, despite its mammoth size.

The firm has also been careful to diversify over a broad range of marketplaces and investment vehicles. The largest investment is in equities, which totals almost 48% of the firm’s Trefis price of $195:

This price may not be too far away, considering probable growth in the firm’s revenue around $9 billion for 2011 and gross profits around $4 billion now, which may top $5 billion by 2017.

The firm also benefits from a very hefty profit margin, exceeding 45% for 2011. Also promising is the dividend yield for this stock, which is currently over 3% after an increase at the beginning of the year. With an appearance on the S&P 500, steady revenue growths, strong portfolio performance, and a higher dividend, 2011 was a great year for BlackRock. It may be the first of many.

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Notes:
  1. About us, BlackRock []
  2. BlackRock joins S&P 500, Bloomberg []
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