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 | Â |
| 2010 | 34.81% | Â |
| 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 | Â |
| 2010 | 23.95% | Â |
| 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% | Â | 1.16% | Â |
| 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 | Â |
| 2010 | 10.55 | Â |
| 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 | Â |
| 2010 | 3259 | Â |
| 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 | Â |
| 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 | Â | Â | Â |
| Â | Â | EPS | PRICE |
| 5 year growth rate | Â | 86,00% | 106,00% |
| 5-Year CAGR | Â | 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%.
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