Should You Hold on to BlackRock Despite Expense Worries?

On Nov 14, 2014, we issued an updated research report on BlackRock Inc. BLK. We believe that continuous growth in assets under management (AUM) and opportunistic acquisitions will support the company's revenue growth going forward. However, mounting expenses remain a major concern.

BlackRock, with its diversified footprint across the globe and strong product mix, has significant organic growth prospects. The company's top line has been growing at a 5-year CAGR of 20.7% (2009-2013), with the trend continuing into 2014 as well.

We believe that BlackRock's diversified product portfolio and revenue mix will enable it to adapt easily to the changing needs of clients. Also, the company's brand initiatives for the iShares and ETF business will help it expand top line, going forward.

Driven by BlackRock's strong prospects, the analysts are bullish on the stock as evident from the rise in the Zacks Consensus Estimate over the last 30 days. For 2014, the Zacks Consensus Estimate climbed 2 cents to $19.25 per share, while for 2015 it rose nearly 1% to $20.53 per share.

However, a persistent rise in operating expenses makes us somewhat apprehensive on the stock. Expenses continue to mount for BlackRock, due to increased marketing expenditure as well as a rise in compliance costs.

BlackRock currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked investment managers include Man Group plc (MNGPY), Monroe Capital Corporation MRCC and Northstar Asset Management Group Inc. NSAM. All these stocks have a Zacks Rank #2 (Buy).