Investing has changed dramatically over the years. What used to be a game of individual stock picking has shifted to strategies focused on scale, technology, and diversification.

Exchange-traded funds (“ETFs”) and data-driven tools have made investing more accessible, but they’ve also raised the stakes for firms trying to stand out.

One company, in particular, has excelled at aligning scale and innovation to drive consistent growth and deliver value to its investors.

Since its founding in 1988, BlackRock (BLK) has evolved from a fixed-income risk management firm to a financial behemoth managing over $12.5 trillion in assets under management (“AUM”) as of today.

This growth has been fueled by strategic acquisitions, innovative technology solutions like its Aladdin platform, and its extensive product lineup, including the market-leading iShares ETF family.

The company reported $5.4 billion in quarterly revenues in the most recent quarter, a 13% year-over-year increase.

Adjusted operating income grew 11% in the same period, driven by disciplined cost management and organic AUM growth.

BlackRock’s leadership in the ETF space significantly contributes to its growth, with the iShares platform generating $192 billion in inflows in the first half of the year.

The company’s ETFs span various categories, including emerging markets, fixed income, and even Bitcoin.

The recent approval and launch of a Bitcoin ETF have further solidified its position as a pioneer in the asset management industry.

Beyond ETFs, BlackRock is actively expanding into higher-growth segments like private markets and infrastructure.

The recent acquisition of HPS Investment Partners added $157 billion in AUM and significantly boosted private credit fees.

Similarly, the $3.2 billion acquisition of Preqin last year, a data provider for private markets, aligns with BlackRock’s focus on technology and data-driven investment solutions.

These moves enhance the company’s Aladdin platform, which remains a cornerstone of its competitive edge.

Aladdin’s capabilities in risk management, analytics, and portfolio construction not only strengthen BlackRock’s internal operations but also generate additional revenue by offering the platform to institutional clients.

Furthermore, BlackRock has consistently prioritized shareholder returns through a combination of dividend growth and share repurchases.

Over the past two years, the company has repurchased 2% of its shares and raised its dividend twice, with a current yield of 1.9% and a payout ratio of 50%.

All these factors combined enabled BlackRock to achieve a 47% Uniform return on assets (”ROA”) and 27% asset growth last year.

Despite this, the market does not price in the growth potential of the company. Trading at a 21x Uniform P/E, suggesting room for upside.

We can see what the market thinks through our Embedded Expectations Analysis (“EEA”) framework.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At the current stock price, the market expects the company’s Uniform ROA to decline to around 39% from 47% last year.

BlackRock’s unmatched scale, diversified revenue streams, and commitment to innovation position it as the top player among asset managers.

For investors seeking a reliable stock with a proven track record, BlackRock can offer significant upside in the years ahead.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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