In­vest­ing in In­vest­ing

The Saratogian (Saratoga, NY) - - BUSINESS -

With its stock price at more than $400 per share, many would con­sider Black­Rock (NYSE: BLK) stock to be ex­pen­sive. Re­mem­ber, though, that a $2-per-share stock can be over­val­ued and likely to fall, while a $1,000 stock can be un­der­val­ued and likely to grow.

Black­Rock, with a mar­ket value re­cently top­ping $67 bil­lion, is a ma­jor money man­ager, and the rise of ex­change-traded funds (ETFs) is largely re­spon­si­ble for its suc­cess. As the com­pany be­hind the pop­u­lar iShares line of ETFs, Black­Rock has reaped huge re­wards from in­vestors’ move to­ward pas­sive in­vest­ing so­lu­tions. The rel­a­tively mod­est man­age­ment fees that Black­Rock col­lects from its funds are enough to gen­er­ate a lot of rev­enue, and the suit­abil­ity of ETFs as long-term in­vest­ments has most of those rev­enues re­cur­ring year af­ter year.

Black­Rock doesn’t nec­es­sar­ily look like the per­fect value stock, with its price-to-earn­ings (P/E) ra­tio near 20. But the ETF revo­lu­tion shows few signs of stop­ping. To­tal global ETF as­sets un­der man­age­ment re­cently topped the $3 tril­lion mark, and iShares con­tin­ues to draw a sub­stan­tial share of as­sets com­ing into the mar­ket. Black­Rock’s pri­mary risk is that a bear mar­ket will dampen in­vestor con­fi­dence. That’s likely to hap­pen at some point, as it has in the past, but bat­tered mar­kets have al­ways re­cov­ered and gone on to reach new highs. In the mean­time, pa­tient in­vestors can col­lect a div­i­dend that re­cently yielded 2.4 per­cent.

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