5 Big Buys by Blackrock Investment Management
Aubrey is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The multi-billion investment manager Blackrock Investment Management had $50.6 billion assets under management as of the end of 2012. It has made 242 new purchases and 951 additional buys; it has sold only 64. The biggest buys were for additional shares of ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), JPMorgan Chase (NYSE: JPM), Verizon (NYSE: VZ), and Philip Morris (NYSE: PM).
I have analyzed these companies by looking at their fundamentals and growth prospects. Although I do not show the actual performance of the stocks during the time when the firm made the purchases, as we do not know for sure when exactly the trades happened, analyzing their current performances can still provide useful insights. Looking at how the stocks have been doing so far since the quarter of purchase provides a strong basis as to whether the fund manager had picked the right stocks or not.
Sources: nasdaq.com, whalewisdom.com, and finviz.com; Data retrieved March 2, 2013
The investment manager purchased an additional 4,191,406 shares of Exxon Mobil. The company is now on top of Blackrock’s portfolio, overtaking Apple, with a total position that is worth around $1.345 billion, or 2.66% of the total holdings. Exxon’s healthy valuation based on its P/E ratio of 11.07 and recent positive earnings surprises lure investments. The company has surpassed estimates in the last 2 consecutive quarters. Based on finviz.com compilation, EPS growth of Exxon this year is at 15.14%. The company’s profit margin in end of December 2012 was higher than that for the same time in 2011. If this is coupled with a positive growth in revenues in the future, it would certainly improve further the company’s attractiveness as an investment. Recently, revenues have been experiencing negative growth. On the other hand, the company’s free cash flow for the quarter ending on Dec. 31, 2012 is an impressive $20.65 billion based on data compiled by Marketwatch.com. This should indicate the company’s ability to develop new projects in the future. Meanwhile, dividend income seekers definitely love this company. Its stable and increasing dividend record goes as far back as 2001. The annualized payment in 2012 was roughly 18% higher than that for 2011. In fact, in the previous 3 years, annualized dividend payment grew at an average rate of 9.6% per year.
Blackrock increased its holding in Chevron by 59%, bringing its total shares to over 8.414 million. The stock price has been rallying since mid-November. The company has missed consensus estimates in the last 2 consecutive quarters perhaps due to revenues dwindling in the third quarter of 2012. However, there was a slight revenue improvement towards the end of the year and its margin is improving. The net margin in end of December 2012 was 11.96%, way above that for the same period in 2011 at 8.54%. Like Exxon, Chevron is a top dividend stock, providing consistent and improving payment since 2004. The company may be experiencing some cash constraints (it has a negative free cash flow of $1.51 billion in the latest quarter ending in Sept. 30, 2012), but with a low P/E ratio of only 9.28, improving margins, and stable dividend performance, it is understandable why Blackrock continues to favor this company.
The investment manager bought 60% more of JPMorgan shares. Its total holding has already reached 18,617,497, which is equivalent to 1.62% of its total portfolio. Looking at how robust the stock price is rallying, Blackrock and anyone who have been holding JPM shares must have been raking in huge sums from their investments in JPM. The financial giant has been making positive earnings surprises for all 4 quarters in 2012. It has a healthy P/E ratio of 9.41 and a profit margin that is stably rising. In fact, its net margin has been in the double-digit since 2010. Meanwhile, despite the negative revenue growth it suffered in the middle of 2012, it has been slowly recovering ever since such that in the end of the year, it posted a 7.26% growth. The cash flow statement of JPMorgan boasts the huge amount of free cash flow it is sitting on as of the end-September 2012. Add its stable and increasing dividends and you have a money-maker aboard.
The firm also increased its position in Verizon by a huge 86% or more than 6 million shares, bringing the total holding to 13,137,455 shares. This is equivalent to 1.12% of the asset manager's total portfolio. The company has failed to meet earnings estimates in the last 2 consecutive quarters. This may be attributed to its sliding net margin since the company has been doing quite well in terms of revenue growth. In fact, its quarterly revenue growth has been positive in the last 8 successive quarters. The company’s dividend payment record that goes as far back as 2000 is truly impressive. Its actual P/E ratio in 2012 of 20.77, and the lower forward ratios being estimated show that there is more value to this stock than is currently being shown. Also, the free cash flow of $10.08 billion in 2012 clearly shows that it has the capacity for a strong growth performance in the immediate future. This has been clearly picked up by investors as the stock price has already started to gain a momentum.
Blackrock has nearly doubled its position in the cigarette company when it bought more than 2.8 million more shares. As of the end of December 2012, the stake was equivalent to 1.02% of the firm's total portfolio. In the latest quarter, Philip Morris has exceeded earnings estimates. The company is in for a great 2013 as earnings expectations for the first 3 quarters of 2013 have been raised. Recent data on Philip Morris are sweet – a positive revenue growth of 4.59% in the latest quarter, double-digit net margin, and a low P/E ratio of 17.58 for 2012. Investors seeking steady flow of income highly favor PM for its outstanding dividend growth. Within the past 4 years, the annualized dividend payment has grown by an average rate of 21 percent. The latest dividend has a relatively high value of 85 cents per share. Moreover, the company has a large sum of free cash flow, $8.37 billion in 2012. Given these qualities of the stock, I can only laud the asset manager for picking and buying a great deal of Philip Morris shares in the fourth quarter.
There are times when asset managers seem to be making intriguing and thought-provoking decisions but their big moves are always interesting to analyze for these are great candidates to get useful investment ideas from. These big buys by Blackrock Investment Management have several things in common; they have high potential for appreciation as given by the low P/E ratios and all of them are awesome dividend stocks that exhibit high growth potentials. I believe, each of these is worth the space it occupies at the asset manager’s portfolio.
aubrey1102 has no position in any stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool owns shares of JPMorgan Chase & Co. and Philip Morris International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!