A Large Global Asset Manager with Huge Insider Buys

Anh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

I am often very excited about insiders’ buys, especially those with huge value. It is not about some hundred thousand, or some million dollars, but approaching nearly $100 million in value. In addition, this can be considered one of the biggest insiders buys in the overall market in nearly a decade. Ready to hear the name of the company? It is actually a big investment management firm with the increasing and consistent dividend payment for nearly 10 years. It is BlackRock (NYSE: BLK). Since October, James Grosfeld, the company’s independent director, has bought nearly 496,000 shares at the price range of $186.93 - $192, with the total value of more than $94 million. With a huge amount of one personal insider buy, should we follow?

James Grosfeld, 74 years old, is a private investor. He seems to have a lot of experiences in the real estate industry. He had been the chairman and CEO of Pulte Homes for around 14 years. Previously, he had been on the board of Copart for the period of 1993 - 2007, and as its chairman in 1993-1994. He was also on the board of Lexington Realty Trust and Ramco Gershenson Properties Trust. After the recent buy on November 1, he owns more than 700,500 shares of BlackRock.

BlackRock is a financial services firm, providing investment management services for a variety of customers. As of September 2012, it had more than $3.6 trillion of assets under management globally. The majority of its investments were in fixed income and equity. For fixed income, it had more than $650 billion in active fixed income and more than $393 billion in institutional index. The institutional index was much higher in equity investment, with around $993 billion and nearly $289 billion in active equity.  They are all considered long-term products of BlackRock, accounting for 92% of the total AUM.

In the third quarter 2012, its AUM has increased $113 billion from $3.56 trillion in the previous quarter to $3.67 trillion. Net market appreciation was reported to be $133.5 billion in all long-term products, including $97.2 billion appreciation in equity products and $21.5 billion appreciation in fixed income products. The weakened US dollar against other strong currency such as the Euro, Pound Sterling, and Japanese Yen has brought BlackRock nearly $29 billion growth in AUM.

Currently BlackRock has around $25.2 billion in stockholders’ equity. The stock is trading at nearly $187 per share, and the total market capitalization is $32.62 billion. The market is valuing BlackRock at 14.5x earnings and 1.3x its book value. It is interesting to see that BlackRock is paying constant and increasing dividends over years. In 2003, it paid out $0.34 per share in dividend. In 2011, the dividend has increased to $5.50 per share. However, the payout ratio has increased as well, from 17% in 2003 to 44.5% in 2011. BlackRock has outperformed its smaller peers such as Legg Mason (NYSE: LM) and State Street Corporation (NYSE: STT) in the last 5 years, with nearly 9.7% gain, whereas both State Street and Legg Mason generated losses of 38% and 61.8%, respectively.

<img src="/media/images/user_14219/screen-shot-2012-11-17-at-121557-pm_large.png" />

Legg Mason is managing around $643 billion. It is trading at $25.08 per share, with a total market cap of $3.3 billion. The market is valuing Legg Mason at 19.8x P/E and 0.6x P/B. It is paying a 1.5% dividend yield to investors. State Street is trading at $44.21 per share, with the total market capitalization of $20.55 billion. It is currently valued at 11.2x P/E and one time its book value. The dividend yield is a decent 2% 

Foolish Bottom Line

Personally, I think BlackRock has a wide moat with a position as the largest global asset manager. The assets under its management could be considered quite sticky, as the majority are from institutional clients in more than 100 countries. With the huge insider buys, as well as consistent and increasing dividends, BlackRock should be in the portfolios of the long-term investors. 

hoangquocanh has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend BlackRock. 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!

blog comments powered by Disqus