BlackRock’s Global Industry Leadership And Undervaluation Make It A Buy

BlackRock, Inc. (BLK) is one of three asset managers that I own along with T. Rowe Price Group, Inc. (TROW) and Lazard Ltd. (LAZ). I have the first two in my large-cap dividend growth portfolio. BlackRock is trading at about $424 per share down from its peak of almost $600 per share in early 2018. BlackRock’s stock price traded down most of 2018 and is now trading at near the price in early 2019 due to current market headwinds. As an asset manager, BlackRock’s top line is sensitive to market volatility. Furthermore, asset managers are facing an industrywide trend for fee rate compression. But BlackRock, is the global market leader in passive investing, and AUM continues to increase at a good clip that is at a rate greater than the company’s peers. The stock is trading at a P/E (FWD) of ~15 based on consensus 2019 EPS. This is lower than the broader market average of 21.9 and the 5-year historical average of about 18. This combination of market leadership, undervaluation, and over 3% dividend yield makes BlackRock a buy.

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