ETFs are a solid base for BlackRock
This asset manager is seeing particularly strong growth in its iShares family of exchange traded funds.
Exchange traded funds as a whole, and iShares, in particular, owned by BlackRock (BLK) got off to a strong start in 2013. ETFs saw net inflows of more than $28 billion in January and $38 billion in December, the largest two-month total in history.
And accounting for less than 10% of the assets in U.S. mutual funds, ETFs still have plenty of room for growth.
BlackRock does a lot more than ETFs, but iShares assets under management jumped 27% last year, and ETFs remain the company’s strongest growth engine.
Last year, BlackRock earned $13.68 per share excluding special items, up 15%. Credit the growth to 3% higher revenue, aggressive stock buybacks that reduced the share count by 5%, and a boost in net profit margins to 26.1% from 24.7%.
Growth accelerated in the second half of the year. Fees for investment advice, account administration, and securities lending accounted for 86% of 2012 revenue.
Performance fees — extra compensation for topping preset targets — generated nearly 5% of revenue. BlackRock Solutions, a business that provides risk management and other services to institutional clients, accounted for nearly 6%.
Assets under management rose 8% for the year to a record $3.79 trillion. Nearly two-thirds of those dollars are managed for institutional accounts, with 25% of total assets actively managed and 41% in index funds.
While retail accounts comprise the smallest chunk of assets, they generated more than one-third of BlackRock’s $7.71 billion in base fees for the year.
Stock funds captured 97% of total new ETF money in January, but over the long haul fixed income may offer superior growth potential.
Assets in fixed-income ETFs rose at an annualized rate of 57% over the last decade, but still account for just 0.3% of the global bond market. BlackRock says it is jumping into portions of the bond market that large investment banks have vacated, opening new avenues for growth.
The consensus projects per-share profits will rise 13% in both 2013 and 2014. Both estimates have risen at least 3.4% over the last 30 days. In January, the company raised its quarterly dividend 12%.
At 18 times trailing earnings, BlackRock trades at a premium to its peer group well justified by its superior growth potential, and at a 18% discount to its five-year average P/E ratio. BlackRock has been added to our Long-Term Buy List.
More from TheStockAdvisors.com
- Turnarounds in the mortgage market
- A-list, dividend-paying trio
- Wells Fargo: 'Still cheap' among banks
Copyright © 2014 Microsoft. All rights reserved.
The company complains after the son of Florida State's football coach is televised wearing -- gasp -- Under Armour.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.