Dear Mr. Berko: I have been reading your column for over 20 years and often wonder why you never mention BlackRock. I have 70 shares at a good profit and would consider selling 20 shares and buying 200 shares of W.P. Carey. Please give me your opinion on this.
— JD, Indianapolis
Dear JD: Way back in 2003 — when John Thain forced computerized speed trading platforms on the New York Stock Exchange, helping it to self-destruct — BlackRock was trading around $53 a share. I told a reader to sell his 200 shares and invest the proceeds in Fidelity Select Biotechnology Portfolio, which was trading around the same price. Well, holy Michael, Moses and Mary, I hope he didn’t follow my advice, because today BlackRock (BLK) has nearly $5 trillion in assets, manages over 1,360 open- and closed-end funds and is $308 a share. Remember the 1955 movie “Bad Day at Black Rock,” a story about a small town with a troubled past, starring Spencer Tracy? I liked the movie and over the years have watched it several times on TV. But because the story left me with an uncomfortable aftertaste, I never bought a copy for my film library of over 100 favorites, dating back to the late 1940s. I like BlackRock, but something about it always made my teeth itch; so I let my emotions rule over my logic, and that confliction makes me feel as if I’m trying to baptize a cat.
BLK may be the world’s largest publicly traded investment management company, with 11,500 employees headed by a wise, conservative and scrupulous Larry Fink, who owns 1.2 million shares. BLK’s impressive track record of growing revenues, growing earnings and growing dividends is almost nonpareil in the land of real estate investment trusts. Since 2003, revenues have grown nineteenfold, earnings have grown nearly tenfold and dividends have increased twentyfold, to $8 this year. While all this increasing was going on, BLK’s share price climbed sixfold, to as high as $322, and net profit margins of 28 percent continue to improve the bottom line. What more can an investor demand? Still, every time I think of the stock, images of Spencer Tracy and that troubled town move to the forefront of my mind.
I have enormous respect for Mr. Fink, whose open disdain of Carl Icahn’s corporate raider mentality and criticism of leveraged fund portfolios are a prelude to financial sainthood. Fink’s BlackRock runs exchange-traded funds, closed-end funds, worldwide public and private pensions, hedge funds, unit trusts, iShares, structured funds, and virtually everything else that Merrill Lynch, Goldman Sachs, UBS, Wells Fargo, etc., do — but with less fanfare and superior results.
Though BLK’s “bigness” is off-putting to me, it should not be off-putting to you. Most analysts think BLK will continue its winning ways, and Reuters, Deutsche Bank, Standard & Poor’s, UBS, etc., believe that BLK’s shares will continue higher. There’s a lot of safety in owning the biggest. (Vanguard, PNC Financial Services, Wellington Management, State Street and Fidelity own tens of millions of shares.) It’s sort of like the security and comfort of being in bed with an elephant. But heaven help you if the elephant sneezes or rolls over. Still, I think BLK is a classy asset.
I also like W.P. Carey (WPC-$67.86), a classy global real estate company that invests primarily in triple-net-leased commercial properties and manages publicly owned, non-traded real estate investment trusts. Net revenues have doubled in the past decade, and the dividend — currently 5.6 percent, which is more than twice what it was in 2004 — has risen slowly but steadily since 1998, even through the two world recessions.
I think WPC is going higher, and I think Larry Fink, whose BLK owns over 3 million shares, wouldn’t be upset if you sold 20 shares of his company’s shares to purchase 500 shares of WPC.