Why BlackRock Stock Is a Must-Buy for Long-Term Investors
While the iShares Bitcoin Trust (NASDAQ:IBIT) is the world’s largest Bitcoin (BTC:USD) fund with nearly $20 billion in net assets, that doesn’t necessarily make BlackRock (NYSE:BLK) bulletproof, but BlackRock stock has a lot more going for it.
BlackRock was founded in 1988 by CEO Larry Fink and seven other partners. In the past 36 years, it has grown its AUM (assets under management) to $10.5 trillion.
Fink’s most significant acquisition in terms of changing its business trajectory was the $13.5 billion purchase of Barclays Global Advisors and the iShares franchise in 2009. That indicated to Wall Street that BlackRock was playing for keeps.
In January, it agreed to buy Global Infrastructure Partners for $12.5 billion in cash and stock. The deal adds one of the world’s best infrastructure asset managers with more than $100 billion in AUM.
“This will be one of the fastest-growing areas of our industry over the next 10 years,” Bloomberg reported Fink and BlackRock President Rob Kapito’s comments in a January memo to employees.
It could be another game-changer for Larry Fink and company. BlackRock stock is a buy. Here’s why.
Multiple Income Streams and BlackRock Stock
Although the company doesn’t break out reportable segments, it categorizes its AUM into four categories: Client Type, Product Type, Investment Style, and Client Region.
The most appropriate categorization is by Product Type. BlackRock breaks it down into five products: Equity (56% of AUM in Q1 2024), Fixed Income (27%), Multi-asset (9%), Alternatives (3%), and Cash Management (5%). It added $57.2 billion in net flows in the first quarter.
The first quarter’s base fees and securities lending revenue was $3.78 billion. In addition, it earned an additional $950 million in various fees, including performance-related ones. Overall, its revenue increased by 11.4% year over year and 2.1% sequentially.
The addition of GIP adds to its illiquid alternatives revenue stream, with the possibility of growing organically through net inflows and future acquisitions.
What Does GIP Bring to the Table?
With GIP, BlackRock’s infrastructure business will become three times larger, with $150 billion in AUM. FinanceAsia.com says the combined company will become the world’s second-largest infrastructure investor behind Macquarie Group (OTCMKTS:MQBKY).
“This deal is the biggest acquisition of a private equity firm of all time,” a former World Bank officer told FinanceAsia.com. “They will be tough competitors for global infrastructure deals. This giant infrastructure fund could squeeze out infrastructure investors like Cheung Kong Infrastructure.”
As Larry Fink said in its Q4 2023 conference call, the acquisition will increase its alternative assets to 10%, triple their current value.
Partially owned assets include the Sydney Airport (37%) in Australia, Edinburgh Airport (100% but has agreed to sell 50.01% to VINCI Airports), and, through a consortium that includes GIP, Meridiam, and Caisse des Dépôts Group, 100% of the Suez Group, a prominent French environmental services company.
It’s a big deal.
Fink’s Annual Chairman’s Letter Highlights Why BLK Is a Buy
I’ve always liked Fink’s writings because he’s so good at discussing highbrow, important subjects using everyday stories and examples to make his case.
This year, he used a great story about his parents and the size of their investment portfolio when they died to illustrate how vital retirement is. He mentions the word 90 times.
“The first is providing people what my parents built over time — a secure, well-earned retirement. This is a much harder proposition than it was 30 years ago. And it’ll be a much harder proposition 30 years from now. People are living longer lives. They’ll need more money. The capital markets can provide it — so long as governments and companies help people invest,” Fink writes.
There’s no question Fink has a vested interest in people buying BlackRock stock to fund their retirements. However, that doesn’t mean he’s wrong.
He’s a very bright person who’s built a massively successful business. The last thing he wants to do is to leave it in poor shape for the next generation of leaders.
Investing in BlackRock today is safer than it was a decade ago. If there is ever a time to buy BLK, this is it.
BlackRock stock is a Buy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
