By Michael Cintolo, Editor of Cabot Top Ten Trader and Cabot Market Letter
From Cabot Wealth Advisory 2/25/13 Sign up for free Cabot Wealth Advisory e-newsletter
Today I want to present you with a bigger, well-sponsored stock that I think still has great upside if the market keeps going. It’s BlackRock (BLK), the huge money manager (and owner of the iShares franchise); interestingly, many “bull market stocks” have, at least so far, shrugged off the market’s gyrations, which is a positive sign.
Here’s what I wrote about BlackRock back in mid-January, when I named it my Editor’s Choice for the week in Cabot Top Ten Trader:
“As the general market has heated up, I’ve noticed more and more “Bull Market stocks”—brokerage, investment bank and asset management firms, each of which directly benefit from higher stock prices and increased trading activity—pushing to new highs. BlackRock might be the granddaddy of the group; the company has an almost unbelievable $3.8 trillion of assets under management! Obviously, that’s not all mom-and-pop investors, but big institutional pension and hedge funds, as well as some very wealthy individuals. One big driver is the firm’s iShares business, which was acquired in 2009 and has been a big hit; BlackRock’s top brass alluded to a secular shift into ETFs and more passive investments, which plays right into iShares’ hands. Best of all, management is committed to returning cash to shareholders—it just hiked the dividend 12%, resulting in an annual yield just south of 3%, and continues to buy back shares quarter after quarter; the company repurchased about 5% of its shares last year, and has authority to buy another 5% going forward. With sales growth picking up, earnings growth accelerating and the potential for better-than-expected earnings in 2013 if the market continues its winning ways, I think BlackRock has solid upside.”
Earnings are expected to rise 13% this year, though I think that’s likely conservative, especially if the market’s bull trend continues. BLK isn’t going to make you rich, but I also think it can surprise on the upside if the market behaves itself.
As for the stock, it hasn’t gone much of anywhere during the past month. To me, that lack of spunk is offset by BLK’s resilience of late; it’s still perched right near its peak. If you really want in you could buy some here, but ideally, the market will have another shake in the days ahead, possibly dragging this stock toward support in the 230-235 area—that would be a solid buy, and you could use a tight stop around 215 if you get in.
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From Cabot Wealth Advisory 1/2/13 Sign up for free Cabot Wealth Advisory e-newsletter
Which stocks will perform well in 2013? As the Editor of the Cabot Benjamin Graham Value Letter, I follow value stocks closely. For the past several decades, value stocks have outperformed growth stocks consistently, but during the past 15 months, growth stocks have outperformed value stocks.
During the past three months, though, value stocks have begun to outshine growth stocks. I believe 2013 will be an exceptional year for value stocks. Top-notch companies in leading industries are clearly undervalued and look very attractive.
I scanned my database to find five stocks with the right credentials to perform very well in 2013.
One of my recommendations is BlackRock (BLK). BlackRock is the largest publicly traded investment management company in the world, with assets under management totaling $3.7 trillion. The company offers a variety of investment and advisory products and services to institutional and individual investors. The 2009 acquisition of Barclays Global Investors, manager of all iShare ETFs, doubled BlackRock's revenues and added significant profits.
Black Rock is best known for its expertise in fixed income asset management. The company has benefited from the globalization of capital markets and the growing demand for more sophisticated risk management tools and solutions. The firm has been gaining market share, aided by its size and untarnished reputation in the marketplace.
Sales and earnings growth slowed during the past 12 months, but a rebound is under way. Sales will likely rise 9% and EPS will increase 11% in 2013. New business from banks and governments seeking help to manage asset risk and to help unload troubled assets could push sales and earnings higher than expected. BLK is Low Risk, share price volatility is below average, and the dividend yield is attractive at 2.9%. Buy now.
I will continue to follow BlackRock and other blue-chip, high-quality investments in my Cabot Benjamin Graham Value Letter. In every issue, you'll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks plus my up-to-date predictions for the Dow Jones Industrial Average. Click here for more information.
From Cabot wealth Advisory 5/30/11 Sign up for free Cabot Wealth Advisory e-newsletter
So which stock will be our next big winner? BlackRock (BLK) offers great potential and fits all of my fundamental criteria. The stock price is very reasonable, too.
BlackRock is the largest publicly traded investment management company in the world with assets under management totaling $3.65 trillion. The company offers a variety of investment and advisory products and services to institutional and individual investors at home and abroad.
BlackRock's December 2009 acquisition of Barclays Global Investors is adding significant revenues and profits. Barclays' vast array of iShare ETF offerings will enhance BlackRock's product portfolio and lead to significant cross-selling opportunities. A recent study found that many institutional investors, such as pension funds, are investing significantly more dollars into ETFs in 2011.
During the past 12-month period, BlackRock's revenues and earnings per share (EPS) soared 56% and 48% respectively. The Barclays purchase and improved financial markets helped to produce outstanding results. I forecast revenue and EPS growth of 15% during the next 12-month period. BlackRock could exceed my forecast if sales of iShare ETFs continue to accelerate.
BlackRock's shares sell at a reasonable 15.0 times my forward 12-month EPS forecast. Cost savings and new selling opportunities from the Barclays acquisition will lead to significant growth during the next several years. I expect BLK's stock price to increase to my Minimum Sell Price within two to three years. BLK is very low risk and the dividend yield is attractive at 2.8%. Buy BlackRock, and don't be scared off by the ostensibly high price of almost 200. I think the company's stock price has a lot further to go.
Editor's Note: You could buy BlackRock here and hope for the best or you could subscribe to Cabot Benjamin Graham Value Letter today to get Roy's latest recommendation on this and other top value stocks. Click here to learn more.
J. Royden Ward
Editor of Cabot Benjamin Graham Value Letter
A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of Cabot Benjamin Graham Value Letter, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the Value Letter.
55 East 52nd Street
New York, New York 10055
|Index Membership: N/A
Industry: Asset Management
Full Time Employees: 10,400
1/2/13 BlackRock (BLK): Rebound is underway
5/30/11 BlackRock (BLK): Fits all of Roy Wards' fundamental criteria