BlackRock Booms with ETFs

10/07/2014 7:00 am EST


In a monumental shift for the fund business, investors have poured $185 billion into ETFs so far this year, a record 40% more than the same period last year, explains Philip Springer in Investing Daily's Personal Finance.

The use of ETFs by all types of investors is accelerating across the globe. Enter BlackRock (BLK). Its iShares ETFs have attracted $59.2 billion so far this year, the most of any company and more than double the $27.2 billion over the same period last year.

BlackRock is the world's largest manager of ETFs and of funds overall. It's also the biggest asset manager, with $4.6 trillion.

BlackRock enjoys many advantages over smaller, weaker competitors. Most important are the cost savings, due to the size of its operations; a broad product mix; and many distribution channels that reach around the world.

It is also in a good position to take advantage of the move from actively managed funds to passively managed funds. The company's iShares leads the ETF market with a 39% share in the US and 38% globally. And iShares is the fastest-growing product category.

After dropping sharply in the 2008 financial crisis, BlackRock's earnings per share (EPS) have since tripled. The company's stock and dividends have also risen steadily. Today it's a financial juggernaut.

In the latest quarter, EPS jumped 18% on a 12% gain in revenues. Wall Street analysts project full-year EPS of $19.22, 16% over the 2013 level. BlackRock shares trade at 17 times that number, roughly in line with the valuation of the S&P 500 stock index (SPX), but with double the benchmark's profit-growth rate.

BlackRock has increased its dividend 722% over the last ten years, with the latest hike this year of 15%. The company also is buying back shares, further boosting EPS. The share count has declined 11% since 2010. Current yield: 2.3%.

BlackRock's diversified products, revenue mix, and global footprint should enable it to adapt to changing client needs and market conditions while generating solid profit growth and investment returns. Buy BlackRock, a new addition to the PF Growth Portfolio, up to $345.

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