Investment Q&A

BLK is one of the largest asset managers in the world and is now trading at 19.6x times' Forward P/E (historical averages range from 17.1x to 21.5x). In the last five years, sales grew around 4% on average mostly driven organically through AUM growth. The balance sheet is strong, with long-term debt of $6.6B, and long-term debt/Equity is around 21%. BLK consistently raised dividends and repurchased shares over the last few years, supported by solid fundamentals. The key in asset management is the flow of AUM, BLK enjoyed a significant tailwind in the last decade as investors move from active to passive strategies (index funds). Based on consensus estimates, sales are expected to grow by 8% on average driven by growth in AUM.

Going forward, competition from alternative asset managers such as BX, BAM, KKR, etc. could be intensified, affecting BLK’s growth, although we think that scenario would be unlikely. We would be comfortable adding to BLK as a solid dividend grower overtime. Lower interest rates (once they occur) should help the company's deal-making ability.