Why BlackRock Is On Our Buy List

Oct.26.11 | About: BlackRock, Inc. (BLK)

BlackRock Inc. (NYSE:BLK) provides investment management services (fixed income, equity and cash management) to institutional clients and individual investors worldwide, as well as a family of open-end and closed-end mutual funds, and offers risk management, investment system outsourcing and financial advisory services.

The company has grown its earnings per share between 15%-20% over the last five years and raised its dividend per share from $0.40 in 2003 to $4.00 in 2010. In addition, BLK earned a 7%-9% return on equity. Growth should continue, as the company:

  1. introduces new financial services, especially ETF’s;
  2. expands globally;
  3. benefits from the world wide economy improving;
  4. aggressively reduces costs; and
  5. makes acquisitions.

Negatives:

  1. a large portion of its fees are performance based; and
  2. a decline in the stock and/or bond markets will impact its fees.

BlackRock is rated A by Value Line, has only 15% debt, and its stock currently yields 2.8%.

Statistical Summary

Stock Yield

Dividend Growth Rate

Payout Ratio

# Increases Since 2001

BLK

2.8%

18%

43%

6*

IND**

1.5

4

26

NA

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Debt/Equity

ROE

EPS Down Since 2001

Net Margin

Value Line Rating

BLK

15%

10%

2

25%

A

IND

3

15

NA

15

NA

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*BLK has paid a dividend for only 9 years.

**IND is the average of the Diversified Financial Services industry data compiled from Value Line.

BLK stock made great initial progress off its March 2009 low, quickly surpassing the downtrend off its September 2009 high (red line) and the November 2008 trading high (green line). However, it then faltered, declined in price and eventually found support at lower levels, and has since been in an intermediate-term trading range (purple lines). Longer-term, the stock is in an up trend (straight blue lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns a 100% position in BLK. Shares are currently on the Aggressive Growth Buy List; the lower boundary of its Sell Half Range is $350.

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Disclosure: I am long BLK.