The multi-billion investment manager Blackrock Investment Management had $50.6 billion assets under management as of the end of 2012. It has made 242 new purchases and 951 additional buys; it has sold only 64. The biggest buys were for additional shares of Exxon Mobil Corporation (NYSE:CVX), JPMorgan Chase & Co. (NYSE:JPM), Verizon Communications Inc. (NYSE:VZ), and Philip Morris International Inc. (NYSE:PM).
I have analyzed these companies by looking at their fundamentals and growth prospects. Although I do not show the actual performance of the stocks during the time when the firm made the purchases, as we do not know for sure when exactly the trades happened, analyzing their current performances can still provide useful insights. Looking at how the stocks have been doing so far since the quarter of purchase provides a strong basis as to whether the fund manager had picked the right stocks or not.
Sources: nasdaq.com, whalewisdom.com, and finviz.com; Data retrieved March 2, 2013
Exxon Mobil (NYSE:XOM)
The investment manager purchased an additional 4,191,406 shares of Exxon Mobil (NYSE:XOM). The company is now on top of Blackrock’s portfolio, overtaking Apple, with a total position that is worth around $1.345 billion, or 2.66% of the total holdings. Exxon Mobil Corporation (NYSE:XOM)’s healthy valuation based on its P/E ratio of 11.07 and recent positive earnings surprises lure investments. The company has surpassed estimates in the last 2 consecutive quarters. Based on finviz.com compilation, EPS growth of Exxon Mobil Corporation (NYSE:XOM) this year is at 15.14%. The company’s profit margin in end of December 2012 was higher than that for the same time in 2011. If this is coupled with a positive growth in revenues in the future, it would certainly improve further the company’s attractiveness as an investment. Recently, revenues have been experiencing negative growth. On the other hand, the company’s free cash flow for the quarter ending on Dec. 31, 2012 is an impressive $20.65 billion based on data compiled by Marketwatch.com. This should indicate the company’s ability to develop new projects in the future. Meanwhile, dividend income seekers definitely love this company. Its stable and increasing dividend record goes as far back as 2001. The annualized payment in 2012 was roughly 18% higher than that for 2011. In fact, in the previous 3 years, annualized dividend payment grew at an average rate of 9.6% per year.
Chevron Corporation (NYSE:CVX)
Blackrock increased its holding in Chevron Corporation (NYSE:CVX) by 59%, bringing its total shares to over 8.414 million. The stock price has been rallying since mid-November. The company has missed consensus estimates in the last 2 consecutive quarters perhaps due to revenues dwindling in the third quarter of 2012. However, there was a slight revenue improvement towards the end of the year and its margin is improving. The net margin in end of December 2012 was 11.96%, way above that for the same period in 2011 at 8.54%. Like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX) is a top dividend stock, providing consistent and improving payment since 2004. The company may be experiencing some cash constraints (it has a negative free cash flow of $1.51 billion in the latest quarter ending in Sept. 30, 2012), but with a low P/E ratio of only 9.28, improving margins, and stable dividend performance, it is understandable why Blackrock continues to favor this company.
JPMorgan Chase & Co (NYSE:JPM)
The investment manager bought 60% more of JPMorgan shares. Its total holding has already reached 18,617,497, which is equivalent to 1.62% of its total portfolio. Looking at how robust the stock price is rallying, Blackrock and anyone who have been holding JPM shares must have been raking in huge sums from their investments in JPM. The financial giant has been making positive earnings surprises for all 4 quarters in 2012. It has a healthy P/E ratio of 9.41 and a profit margin that is stably rising. In fact, its net margin has been in the double-digit since 2010. Meanwhile, despite the negative revenue growth it suffered in the middle of 2012, it has been slowly recovering ever since such that in the end of the year, it posted a 7.26% growth. The cash flow statement of JPMorgan boasts the huge amount of free cash flow it is sitting on as of the end-September 2012. Add its stable and increasing dividends and you have a money-maker aboard.