Markets
BlackRock (NASDAQ:BLK) Stock: Smart Exposure to Crypto Growth
Black stone (NASDAQ:BLK) offers something for every investor — value, a growing dividend, and even exposure to Cryptocurrency Long-term market growth. I am bullish on BlackRock based on its dominant position in the financial markets and its stature as a leader in the growing cryptocurrency market. Additionally, I like the stock’s below-market valuation and strong dividend growth.
Dominant Player
With $10.5 trillion in assets under management (AUM) as of its most recent quarter, BlackRock is the world’s largest asset manager, offering products across equity, fixed income, alternatives and more. BlackRock serves institutional and retail clients in more than 100 countries.
Its massive size gives it significant competitive advantages. For example, it can offer investors low fees on many of its investment products, giving it a scale advantage over smaller competitors that have to charge higher fees to be financially viable.
While many traditional asset managers have struggled with the rise of index investing (which comes with lower fees due to the lack of need for active management), BlackRock has thrived. Leading this trend in innovative ways, passive products now account for the majority of its revenue.
Its low fees and passive nature make BlackRock a dominant player across a variety of asset classes, and its well-known iShares ETFs are a good example, as they are some of the largest ETFs in the stock market today.
For example, the iShares Core S&P 500 ETF (NYSEARCA:IVV) is the second largest ETF available, with just under $500 billion in AUM, and there are many other big names in the iShares family of funds, whether it’s the iShares Core MSCI EAFE ETF (BATS:IEFA) (with $118.2 billion in AUM) or the iShares Core Aggregate US Bond ETF (NYSEARCA:AGG) (US$ 108.8 billion), among others.
A Smart Way to Get Exposure to Cryptocurrency
BlackRock is also a smart way to gain exposure to the growth of the cryptocurrency sector and a major beneficiary of the rise of cryptocurrencies, given how the firm has positioned itself as a heavyweight in the space.
BlackRock leveraged its blue chip reputation, size, scale and marketing prowess to make its Bitcoin (BTC-USD) ETF, the iShares Bitcoin Trust (NASDAQ:IBIT), an unprecedented success. Since launching in January, IBIT has accumulated a remarkable $18.4 billion in assets under management (AUM). IBIT reached $10 billion in AUM in just 37 days, becoming the fastest ETF to reach this milestone. IBIT’s remarkable success shows the power of the BlackRock machine in action.
BlackRock has also applied for a spot on Ethereum (ETH-USD) ETF, and given the success of IBIT, it seems likely that BlackRock’s entry will be one of the leading vehicles in this space, if not the dominant player as well.
As cryptocurrency grows in popularity, BlackRock is well-positioned to benefit from this trend by offering institutional and retail investors ETFs and other products that provide exposure to assets such as Bitcoin and Ethereum. These ETF formats may be preferable for many investors due to reasons including familiarity, convenience, security, and regulatory considerations.
It’s important to note that today, crypto only makes up a small portion of BlackRock’s business. But that also makes it a smart way for investors to gain access to the space. It has a lot to offer without crypto and doesn’t need it to succeed, so the downside presented by its crypto exposure is fairly limited, but the upside potential is significant.
Below market valuation
Despite its dominant business model and attractive long-term growth prospects, BlackRock trades at a reasonable multiple of 19.3 times consensus 2024 earnings estimates. While this doesn’t necessarily make BlackRock a foolproof company, stock of value in the eyes of traditional value investors, it is a reasonable multiple that is well below the market average. The S&P 500 (SPX) currently trades at 24.2 times earnings and 22.7 times forward earnings.
This reasonable multiple leaves plenty of upside room for investors, while perhaps adding a bit of downside protection in a turbulent market.
Increasing dividend
In addition to this reasonable valuation, BlackRock also offers investors a decent dividend payout with a yield of 2.6%. As is the case for value investors, this isn’t necessarily a yield that income investors will be excited about, but it is much higher than the average yield on the S&P 500, which currently stands at just 1.3%. Plus, this dividend helps compound the stock’s total returns over time.
BlackRock is also an attractive company dividend growth stocks. Not only has it paid dividends for 20 consecutive years, it has also increased its dividend for 14 consecutive years at a compound annual growth rate (CAGR) of 9.5% over the past five years.
As the company continues to grow and increase its profits over the years, I expect it to continue to increase its dividend payout over time, making the future yield on the cost of the shares much higher for investors who are buying the shares at current levels.
Are BLK shares a good buy, according to analysts?
Turning to Wall Street, BLK earns a Moderate Buy consensus rating based on 11 Buy, two Hold and no Sell ratings assigned over the past three months. average target price for BLK shares of $911.75 implies a potential upside of 2.3% from current levels.
Investor Takeaway
I am bullish on BlackRock based on its dominant position as a market leader in asset management and its potential to continue benefiting from the growth of the cryptocurrency market now that it has established itself as a key player in the space. Furthermore, its reasonable valuation and growing annual dividend further reinforce my positive outlook.