BlackRock Short
With Nasdaq being under 10k again and the US being expected to enter a recession, it’s no doubt that it is going to be a very hard quarter for hedge funds, with many of their top investors already starting to get worried. One thing about these big investment firms that sets them apart from the typical day investor is the fact that they always invest in the most stable, low-moving stocks that are already very well known and a big part of Nasdaq. So assuming that America enters a recession, most of these stocks will go down with it as opposed to much smaller companies that don’t depend on the economical environment. This can also be said about Black Rock as I’m assuming most of their equity is put into very well-known and stable stocks such as Apple. Based on past events, every time there is a report or news on the upcoming events relating to the economy, the companies that are part of the Nasdaq seem to be getting affected the most as compared to lesser-known firms. That’s in my opinion the biggest disadvantage of putting your money into big names. While the results you might get will be stable for years, there are many other influences on the price rather than just what their management is doing, one of them for example being the interest rates increasing. The last time this happened, Nasdaq had a very huge drop even though most of the companies in it weren’t being affected by those numbers. One of those companies is Apple. It dropped by around 3% even though an increase in interest rates will barely have any effect on their customer base or revenue. However, some other companies that rely on interest rates such as Rivian, barely moved as people had their attention on bigger stocks. The problem with hedge funds is that most, if not all of their capital is always invested in the big companies I was talking about earlier. This allows them to produce steady returns to all customers. However, if they enter the environment we are in right now, they have the problem of all of the stocks they own going down at the same time and them having no control over it. This is also why the people stressed the most about the environment we are entering are long-term investors as opposed to day-to-day traders. Recently there were rumors that Credit Suisse was about to file for bankruptcy with them confirming that while it’s not entirely true, they are having difficulties with their cash on hand. I believe the same to be true for Black Rock as their portfolios aren’t much different. On top of that, the US market has been much lower than 3 months ago which means they most likely won’t have any positive return on investment for this quarter which isn’t a very good sign. However, everything I just said wouldn’t make any sense if the inflation and interest rates were expected to come down over the coming months. But that's not the case at all, in fact, they are even estimated to become worse. As we have learned from time to time right now the only thing investors care about is what the future is looking like for that company and for Black Rock it’s not looking bright at all.
People’s opinions:
BlackRock has lost more than $1bn in asset management business in US Republican states upset with the company’s green investing policies, withdrawals that have become a political problem but have not dented the company’s revenues.
We expect BlackRock revenues and earnings to decrease on a year-on-year basis, but top the consensus estimates.
The company’s Assets under Management (AuM) were $10 trillion at the end of Q4 2021, which was 15% more than the level seen at the end of December 2020. It resulted in a 21% y-o-y rise in the total investment advisory, administration fees, and securities lending revenue to $15.3 billion. However, the trend changed in the first two quarters of 2022. The total revenues for the first half were at the same level as the year-ago figure, primarily because of a decrease in AuM. We expect the third-quarter results to be on similar lines.
Report time: Tomorrow before market opens
Expected movement: -3%
P/E Ratio: 28.97
Market Cap: 15.07