Asset managers

Asset Managers like BlackRock and T. Rowe Price have taken a hit this year and seem like unusual bargains.

BLK is the biggest gorilla and after yesterday’s earnings announcement is trading around 17*FY22 EPS estimates. It usually trades around 22-23 Fwd PE. Despite weak markets in Q1, BLK generated 5% organic AUM growth and 10% growth in ETF AUM with stable operating margins of 44%. Greg Warren, Morningstar has a FV estimate of $930 and it is trading currently at $715.

BLK is the vampire squid that once GS used to be, on the Rollodex (or Contacts list) of virtually every Central Bank governor or Treasury Sec to manage/custody the ever growing stimulus/liquidity/bailout programs. It doesn’t look like it is going to be disrupted or dethroned anytime soon.

TROW is a bit more challenged. It has been losing AUM from its funds throughout 2021. However, about two-thirds of AUM are in retirement accounts which are fairly sticky. It has a good reputation for delivering above-average performance at reasonable fees. But the relentless trend to ETFs could lead to more outflows from higher fee earning funds. It has been a great stock to own since its IPO three decades ago, with EPS CAGR of 15% or more for virtually every period from 3yrs and above. It made a profit even in 2009 during the GFC crash. Stock at $142 is trading at a fwd PE of 11, which is extremely cheap historically for a company with double-digit EPS growth. Greg Warren, Morningstar has a FV estimate of $195 and it is trading currently at $142.

Both well worth looking into. Historically great stocks to get into when pessimism is high.