World’s Largest Asset Manager Sees Net Inflows in Q4

BlackRock (Ticker Symbol: BLK) reported better than expected profit for the first quarter of 2019.  As global markets began to rebound at the start of 2019, BlackRock generated tens of billions of new investor money as volatility eased from the previous quarter.  BlackRock is currently the world’s biggest asset manager with $6 trillion in assets under management.

BlackRock is going to continue to focus on traditional investments including, real estate, commodities, private equity, and investing in hedge funds.  However, the world’s largest asset manager did add four new roles to its alternative investments business that will combine both the investment and sales teams together.  BlackRock will undergo a small reorganization for its new venture shifting about 20 directors to roles that will help take the new investment department to the “next level.”

BlackRock is going to be implementing a new approach for its longer-term investors.  The asset manager is reportedly raising upwards of $10 billion dollars for one of its private equity funds.  The funds objective is to replicate the investment approach and methodology of Warren Buffet’s legendary investment firm, Berkshire Hathaway.  Additionally, In February BlackRock joined up with another private equity firm, KKR, to invest $4 billion in the Abu Dhabi National Oil Company.  This joint venture with KKR made both firms the first institutional investors to team up with a national oil producer in the Middle East.

BlackRock’s stock had a monumental 2017, rallying almost 50% and notching in an all-time high of  $594.52 early in the first quarter of 2018.  However, in 2018, BlackRock was not as fortunate and began a massive downtrend giving back all of the stock gains from the previous year. Late in the fourth quarter of 2018, BlackRock’s stock began to form a divergence pattern, where the stock makes a lower low in price, but the Relative Strength Index makes a higher low. (As indicated on the chart by the purple circles with arrows) Traders and investors sometimes look at divergences for a possible pause within the current trend, which can at times lead to a reversal.

After putting in a bullish divergence, the stock broke through a downtrend line from 2018 and began to confidently trade above the 50-day Moving Average.  BlackRock’s shares continued to proceed higher reclaiming its 200-day Moving Average for the first time in almost a year.  Currently, the stock is up just over 15% for the year.

(Chart above courtesy of ​www.tipranks.com​)

BlackRock released news in January that it had plans to cut over 500 jobs, which would be around 3% of its workforce.  This comes as BlackRock, along with other major asset managers, has seen a slowdown in profits due to what the industry is calling the “fee wars” among money managers.

Based on a survey of 9 analysts offering 12-month price targets, the average price target for Blackrock’s stock is $483.22.  According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $465.02.

That said, with the positive report, new ventures in the pipeline, and fresh fund inflows coming into the firm, the future seems bright for the world’s largest asset manager.

 


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