Investors can learn a lot by watching the behavior of corporate insiders as they handle positions in their own companies. People may sell shares for many reasons (such as buying a house, paying for college, or getting ready for retirement). They generally only buy for one reason: to make more money.
The chief executive officer is often one of the largest and best-informed shareholders in any company. Let’s see whether BlackRock Inc. (NYSE: BLK) CEO Larry Fink has been increasing or decreasing his shares over the past year and whether he knows something we don’t.
What You Need to Know About BlackRock
BlackRock is a publicly owned investment manager. The firm primarily provides its services to institutional, intermediary, and individual investors including corporate, public, union, and industry pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities, sovereign wealth funds, corporations, official institutions, and banks.
BlackRock also provides global risk management and advisory services. The firm manages separate client-focused equity, fixed income, and balanced portfolios. It launches and manages open-end and closed-end mutual funds, offshore funds, unit trusts, and alternative investment vehicles including structured funds. It also launches and manages:
- Equity, fixed income, balanced, and real estate mutual funds
- Equity, fixed income, balanced, currency, commodity, and multi-asset exchange-traded funds
- Hedge funds
BlackRock invests in the public equity, fixed income, real estate, currency, commodity, and alternative markets across the globe. The firm primarily invests in growth and value stocks of small-cap, mid-cap, SMID-cap, large-cap, and multi-cap companies. It also invests in dividend-paying equity securities, as well as in investment-grade municipal securities, government securities including securities issued or guaranteed by a government or a government agency or instrumentality, corporate bonds, and asset-backed and mortgage-backed securities.
The firm employs fundamental and quantitative analysis with a focus on bottom-up and top-down approach to make its investments. It also employs liquidity, asset allocation, balanced, real estate, and alternative strategies to make its investments. The firm benchmarks the performance of its portfolios against various indices.
BlackRock was founded in 1988 and is based in New York City. So are competitors Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS). State Street Corp. (NYSE: STT) and Fidelity Investments are headquartered in Boston, while Charles Schwab Corp. (NYSE: SCHW), Northern Trust Corp. (NASDAQ: NTRS) and Raymond James Financial Inc. (NYSE: RJF) are based elsewhere.
Fink has been CEO of BlackRock since 1988 and is also a co-founder and the chair of the board of directors.
The company posted almost $17.9 billion in revenue and has a market capitalization of more than $114.6 billion. BlackRock stock closed more than 14% higher in 2023, but the S&P 500 saw a gain of more than 23% for the year. Note that the shares have retreated about 3% year to date.
How BlackRock’s CEO Is Trading
One year ago, Fink owned almost 563,800 shares, worth almost $310.2 million. Today, he owns more than 450,600 shares. Yet, despite parting with more than 113,000 shares, the value of the stake has increased by almost 13% to over $349.9 million as the share price has risen.
|Shares a Year Ago
CEO Larry Fink could have sold shares for a variety of reasons, and we may never know the truth. If we take trimming the stake as a sign of a lack of confidence, could it be that the recent pullback is more than ordinary volatility? Do Fink and the other selling insiders know something we don’t? Note that the share price is in the same ballpark as it was two years ago.
Analysts are positive though. Twelve out of 15 of them recommend buying shares. Their current mean price target indicates almost 9% upside in the next 12 months. And earnings are projected to grow over 9% in the next five years, modestly faster than the rate in the past five years.
Other internal shareholders to watch include co-founder Susan Wagner. She owns nearly 0.3% of shares outstanding, worth about $338.6 million. Robert Kapito, another co-founder, is the president and owns less than 0.2% of shares outstanding. That is worth almost $161.0 million. (These 19 executives pay themselves over $150 million a year.)
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