BlackRock Financial Management, Inc. is an investment advisory and hedge fund firm founded by Robert S. Kapito. The firm is a subsidiary of BlackRock, Inc. (BLK). The firm caters to high net-worth individuals, banking or thrift institutions, pension and profit sharing plans, charitable organizations and corporations and manages over $150 billion in assets.
Investment Strategy: BlackRock Financial Management combines quantitative screens and risk analysis with fundamental research. The firm reduces the universe of potential candidates through proprietary screens. Each specific style determines which factors are reviewed in the screens. The BlackRock large-cap series team identifies companies that are trading at reasonable valuations, as well as possess quality management, strong earnings growth rates, and the potential for excellent long-term performance relative to the benchmark. The firm employs fundamental analysis to verify or reject the results of the model by evaluating data accuracy, growth quality, as well as the sustainability or feasibility of growth rates. The bottom-up stock selection is used to guide sector weightings.
The following is a list of its top buys in the last quarter, as released in BlackRock's most recent 13F filing with the SEC.
Shares Held - 03/31/2011
Shares Held - 06/30/2011
Biogen Idec Inc.
Lockheed Martin Corporation
Western Union Co.
My favorites among the above stocks are Microsoft and Covidien.
Microsoft (MSFT) is trading at just 8.43x current year (June 12) EPS, which is very attractive. At these levels, I don’t think the market is pricing in any of the positive initiatives company is taking. Some of the important initiatives which can drive meaningful growth over the next one year are the Windows 8 launch, Office 365, which is gaining traction and a successful launch of Nokia's (NOK) WP7 phones. In addition, Microsoft’s excess cash position provides a downside cushion. As valuations of other tech companies reach more reasonable levels due to the market correction, several attractive acquisition opportunities may arise. I think Microsoft offers an attractive risk reward for investors who can hold the stock for the next couple of years.
Covidien is another good company to go long on. Analysts from Morgan Stanley and Goldman have recently suggested buying its stock. Bank of America also released a positive report on the stock a few day back. In addition to BlackRock, Covidien is also one of the top buys of PNC Financial Services. As I mentioned in my previous article, accelerating organic revenue growth, beatable consensus numbers and low PE multiple makes the stock attractive. The stock is likely to rise going forward and its FY2012 guidance on September 8 (analyst day) is likely to serve as a major catalyst.
For other stocks in the above list, here are some of the specifics about these companies, including a brief description of their businesses, growth expectations (top line and bottom line):
CenturyLink, Inc. is an integrated communications company. CenturyLink is engaged primarily in providing a range of communications services, including voice, Internet, data and video services. The company also provides fiber transport, wholesale communications services, competitive local exchange carrier service, security monitoring and other communications, professional and business information services in certain local and regional markets. CenturyLink's EPS forecast for the current year is $2.64 and next year is $2.75. According to consensus estimates, its top line is expected to grow 154.20% in the current year and decline 1.40% next year.
Pfizer Inc. is a research-based, global bio-pharmaceutical company. The company operates in two segments: Bio-pharmaceutical and Diversified. Pfizer's EPS forecast for the current year is $2.25 and next year is $2.28. According to consensus estimates, its top line is expected to decline 2% in the current year and 5.5% next year.
Biogen Idec Inc. is a global biotechnology company focused on discovering, developing, manufacturing and marketing products for the treatment of neurological disorders and other serious diseases. The company’s products include AVONEX, TYSABRI, FUMADERM and RITUXAN. Biogen's EPS forecast for the current year is $5.87 and next year's is $6.34. According to consensus estimates, its top line is expected to grow 4.90% in the current year and 4.30% next year.
Lockheed Martin Corporation is a global security company engaged in the research, design, development, manufacture, integration, and sustainment of advanced technology systems and products. The company also provides a range of management, engineering, technical, scientific, logistic, and information services. It serves both domestic and international customers with products and services that have defense, civil, and commercial applications, with its principal customers being agencies of the United States government. The company operates in four business segments: Aeronautics, Electronic Systems, Information Systems & Global Services, and Space Systems. Lockheed Martin's EPS forecast for the current year is $7.49 and next year is $8.76. According to consensus estimates, its top line is expected to grow 1.90% in the current year and 2.10% next year.
CSX Corporation is a transportation supplier. The company provides rail-based transportation services, including rail service and the transport of inter-modal containers and trailers. CSX's EPS forecast for the current year is $1.75 and next year is $2.05. According to consensus estimates, its top line is expected to grow 12.20% in the current year and 7.70% next year.
Ensco Plc is a global offshore contract drilling company. The company’s business operates in four segments: Deepwater, Asia Pacific, Europe and Africa and North and South America. Each of its four operating segments provides one service, contract drilling. Ensco's EPS forecast for the current year is $3.69 and next year is $5.97. According to consensus estimates, its top line is expected to grow 72.10% in the current year and 52.60% next year.
The Western Union Company is engaged in money movement and payment services. Western Union services are available through a global network of more than 445,000 agent locations in more than 200 countries and territories, with approximately 85% of those locations outside of the United States. Western Union's EPS forecast for the current year is $1.56 and next year is $1.72. According to consensus estimates, its top line is expected to grow 5.50% in the current year and 6.80% next year.
Corning Incorporated is a technology-based company. Corning operates in five business segments: Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences. Display Technologies segment manufactures glass substrates for matrix liquid crystal displays. Corning's EPS forecast for the current year is $1.97 and next year is $2.16. According to consensus estimates, its top line is expected to grow 21.80% in the current year and 10.70% next year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.