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Stock Analysis & Ideas

BlackRock Stock: Befriending the Biggest Bully at School

Story Highlights

Although asset-management firm BlackRock generates considerable controversy for its questionable business practices, investors can also turn this market bully on their side for potentially significant gains.

No one is going to confuse asset-management firm BlackRock (BLK) as an environmental, social, and governance (ESG) investment. Even the corporate branding sounds ominous, akin to a private military company rather than a Wall Street juggernaut.

Nevertheless, the myriad controversies undergirding BLK stock could be beneficial during these strange times. I am reluctantly bullish on BlackRock.

While avoiding overt political discussions, it cannot be ignored that BlackRock commands a less-than-favorable reputation. A case in point is Fox News anchor and firebrand Tucker Carlson inviting journalist Pedro Gonzalez on his program to discuss evidence of BlackRock purchasing entire neighborhoods and converting single-family homes into rental properties. Essentially, the asset manager is killing the American Dream.

With Carlson himself at the center of myriad political and ideological controversies, BLK stock may have found itself as one of this country’s most hated investments.

Apparently, the pressure was so overwhelming that BlackRock issued a statement on its website, declaring in a bold black font that it “is not buying individual houses in the U.S.”

Though it’s cathartic perhaps to beat up on BlackRock, the asset manager does have a point. Generally speaking, institutional investors play a small role in single-family homes. Instead, the culprit for the ridiculous housing boom during the post-COVID-19 paradigm is speculation among individual homebuyers combined with housing supply constraints.

Still, BlackRock’s reputation is such that the company makes for a credible scapegoat. Nevertheless, investors may want to look at BLK stock from a different perspective.

BlackRock’s Smart Score is Very Optimistic

On TipRanks, BLK stock sports a ‘Perfect 10’ Smart Score rating. This indicates strong potential for the stock to outperform the broader market.

BLK Stock and the Bully Thesis

Few rational kids enjoy the presence of the schoolyard bully, in part because bullies tend to be reared in troubled family environments. On a guttural level, though, being friends with local tyrants can be strangely uplifting, if only because you don’t have to face the wrath of their anger.

So it is with BLK stock. No, it’s probably not an investment that you will proudly proclaim ownership of. Indeed, you might do everything in your power not to mention it. However, for those committed to staying in the market, BlackRock represents one of the few options with a viable upside framework.

Primarily, BlackRock owns the best risk-management tools, which are so powerful that even the Federal Reserve and the European central banks use them. Combined with hiring the best talent in investment management and quantitative analytics, BlackRock is uniquely positioned to provide its clients with superior guidance.

The harsh reality is that between the March doldrums of 2020 to the end of 2021, the stock market enjoyed a substantially bullish upside bias. In other words, retail investors conflated their supposed genius with market dynamics that were lifting almost everything higher thanks to the Fed’s easy money policies.

However, now that the Fed is taking away the punch bowl, the real work begins. Under the present circumstances, BlackRock’s sheer size and near-monopolization of the best investing tools provide some comfort for BLK stock, even if the underlying corporate ethos is toxic.

We’re All BlackRock – Here’s Why

According to Pew Research Center, Generation Z and Millennials distinguish themselves for their climate change activism. In addition, young people tend to care more deeply about social issues, such as addressing wealth disparities. Therefore, something like BLK stock stands in sharp contrast to burgeoning ideologies in America.

However, the truth of the matter is that, in a way, we’re all BlackRock. For instance, several public and private pension and retirement plans – including 401(k) and IRA plans – hold a massive amount of equity in oil and natural gas companies. Though hydrocarbons have publicly gone out of favor, they undergird American retirement because that’s where the money is.

To be sure, BlackRock engages in questionable practices that would presumably, in any other context, raise alarms regarding conflicts of interest.

However, because – to borrow a description from The American Prospect – BlackRock is a Swiss Army knife (an “institutional investor, money manager, private equity firm, and global government partner rolled into one”), it gets to bully its way to the front of the line.

Morally, most investors arguably have issues with this mentality. However, with the economy and market steadily eroding into a cutthroat environment, BLK stock may be investors’ best friend.

Wall Street’s Take on BlackRock Stock

Turning to Wall Street, BLK is a Strong Buy, based on 10 Buys, two Holds, and no sell ratings. The average BlackRock price target is $832, implying 35.34% upside potential.

Conclusion – It’s a Dirty Business

On a final note, the narrative supporting BLK stock is an inevitability. While social awareness has arguably never been higher, the ability for regular folks to impact substantively positive change has never been lower. Sadly, the share of total net worth for the middle class is currently down at 28.1%, far below its 2003 peak of 36.6%.

Therefore, if investors want to win, they must consider market bullies like BLK stock. It’s not fun; it’s not pleasant, but it could very well be profitable.

Disclosure

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