1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Tiziano Frateschi
Tiziano Frateschi
Articles (993)  | Author's Website |

Why Ken Fisher Is Buying Black Rock Inc.

A strong growth rate and solid fundamentals make company attractive

August 31, 2015 | About:

During the last quarter, investor Ken Fisher (Trades, Portfolio) with his Fisher Asset Management’s fund, increased by 147.95% his stake in Black Rock Inc. (BLK), and now he holds 87,758 shares and is the third main holder of the company.

The company

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide which helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions.

Last quarter results and outlooks

BlackRock Inc., the world’s largest money manager, reported better than expected second-quarter numbers, EPS of $4.96 versus the estimate EPS of $4.81, up 1% compared to a year ago and operating income up 10% year over year.

Those same clients reinvested across BlackRock's active equity and fixed income, multi-asset resulting in a positive net revenue impact for the firm, since for the quarter it came in at $2.91 billion and versus the consensus estimate of $2.86 billion was up 5% compared to a year ago.

The New York City-based company, by attracting money into higher-fee products including active funds and exchange-traded funds, saw its second quarter profit rise by 1.4%.

As technology remains a key area of focus and investment for BlackRock across all aspects of its business to enhance its investment process, client service and operational efficiencies, in the last quarter the company acquired Infraestructura Institucional, also known as I Cuadrada, the leading independently managed infrastructure investment business in Mexico. Also recently BlackRock has acquired FutureAdvisor, a "robo-adviser" crafting automated portfolios for investors; under this deal the company will become part of BlackRock Solutions and its products will be sold to brokers and financial advisers, who in turn can offer them to their clients.

As an important part of its approach to capital allocation for the future its board expects to increase the amount of shares authorized for repurchase by approximately 40%, to a total of 4 million shares, until June 30, 2016. The increased share repurchase program will afford them the ability to create value for their client-shareholders and also will provide support for their equity over the long-term. For the rest of year BlackRock will continue to focus on net investment income growth and continuing to raise the ROE of the business.

Profitability

The company has a steady operating margin that is growing at an average rate of 3.30% year by year; that is a growth rate of 16% over the years 2010-2014.

year

Operating Margin

 

2010

34.81%

 

2011

35.78%

+2.79%

2012

37.74%

+5.48%

2013

37.89%

+0.40%

2014

40.38%

+6.57%

TTM

40.90%

+1.29%

Even during the years prior to 2010, the company had the same rates; that means the core business is profitable, mainly thanks to revenues that during the last five years have had an increase of 28.67% while costs from sales, along with general and administrative expenses, grew at a lower rate of 20%.

Even the net margin, as well as the operating margin, is steady and growing,

year

Net Margin

 

2010

23.95%

 

2011

25.74%

7.47%

2012

26.33%

2.29%

2013

28.80%

9.38%

2014

29.73%

3.23%

TTM

29.94%

0.71%

Five-year growth rate is 24.13% with an average rate of 4.62% on a year-over-year basis.

Returns are positive but if ROE of 12.35% is ranked higher than 72% of BlackRock’s competitors, ROA of 1.44% is very low and is ranked lower than 63% of other companies in the same sector.

Returns

year

ROE

y-y gr

ROA

y-y gr

2010

8.18%

 

1.16%

 

2011

9.14%

11.74%

1.30%

12.07%

2012

9.74%

6.56%

1.29%

-0.77%

2013

11.31%

16.12%

1.40%

8.53%

2014

12.24%

8.22%

1.43%

2.14%

Anyway both returns are positive and growing. ROE has grown by 50% over the last five years with a CAGR of 8.39%, and ROA by 23% with a CAGR of 4.27%

Even earnings have a strong track record.

Year

EPS

 

2010

10.55

 

2011

12.37

17.25%

2012

13.79

11.48%

2013

16.87

22.34%

2014

19.25

14.11%

(2015)

20.10

4.42%

(2016)

22.82

13.53%

(2017)

26.19

14.77%

Analysts estimate EPS will grow again in the next years, but in 2015 they will take a pause and will grow just by 4.42%, while over the last five years it has grown at an average rate of 16.29% year-over-year and with a growth rate of 82.46% since five years back.

Financials

The company has a financial strength rated 5 out of 10 with cash to debt of 0.72 that is all based on long-term debts that are growing at a very fast rate.

Year

Long-Term Debts

 

2010

3259

 

2011

6264

92.21%

2012

8089

29.13%

2013

7308

-9.66%

2014

8327

13.94%

Debts are growing at a very fast rate of 155.51% over the last 5 years with an average growth rate of 31% on a year over year basis.

Dividend yield

The company has a continual dividend increase since 2009, and now the yield is 2.64% with a payout ratio of 41%.

The yield has grown by 23% over the last 10 years and by 8.90% on a three-year basis and the current ratio of 2.64% is one of the highest yield in the company’s history.

The price

The price has dropped by 8% during the last 12 months but has risen by 106% over the last five years and the stock is now trading with a P/E (ttm) ratio of 15.45 that is ranked lower than 60% of other companies in the same sector.

Stock price

Year

Highest

Lowest

Average

y-y growth from average

2010

$ 192.51

$ 139.44

$ 165.98

 

2011

$ 198.49

$ 141.77

$ 170.13

2.50%

2012

$ 209.29

$ 163.37

$ 186.33

9.52%

2013

$ 316.47

$ 212.77

$ 264.62

42.02%

2014

$ 364.40

$ 286.39

$ 325.40

22.97%

The five-year CAGR is 14.41% but what really matter is that both the price and EPS grew at almost the same growth rate as summarized below.

EPS and Price

     
   

EPS

PRICE

5 year growth rate

 

86,00%

106,00%

5-Year CAGR

 

8,39%

14,41%

Average growth rate of the last 5 years

16,29%

19,25%

Hedge fund and gurus

During the last quarter, Ken Heebner (Trades, Portfolio) and Ruane Cunniff (Trades, Portfolio) sold out their stakes, while Louis Moore Bacon (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Jim Simons (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) bought shares of the company and now Tom Gayner (Trades, Portfolio) is the main shareholder with 0.08% of outstanding shares of the company, followed by Jim Simons (Trades, Portfolio) with 0.07% and Ken Fisher (Trades, Portfolio) with 0.05%.

About the author:

Tiziano Frateschi
You can read about me on this blog: www.theextraincome.info

It gives suggestions on position trading.

Visit Tiziano Frateschi's Website


Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


GuruFocus has detected 5 Warning Signs with BlackRock Inc $BLK.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.

Performances of the stocks mentioned by Tiziano Frateschi


User Generated Screeners


boursep - peter lynch4
toshi23Quality Growth
pbarker46Short % < 2,PE10 <30
DANGORDONEPS GROWTH 4-28-17
nuno.a.pomboEstatiscal Low Priced Stocks
blain.lyall#1
hugHigh Piotroski
hugHigh Piotroski & Low EV/REBITD
pbarker46Shiller USA
BoubaOCF Size 1
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK