Inflows Bolster Blackrock’s Outlook, Shorts Annihilated

Financial stocks are suddenly the hottest game in town; the shorts that were loading up on puts in the stock of Blackrock Inc. (BLK-NYSE) will be wondering what hit them as the stock snaps backs a quick 50 points from its recent lows. Good earnings, resolution of the Merrill Lynch saga, and remarkable inflows as investors seek a prudent place to stash their cash has the stock jumping this morning:

Net income increased to $274.1 million, or $2.05 a share, from $222.2 million, or $1.69 a share, a year earlier, New York- based BlackRock said today in a statement. Revenue climbed 26 percent to $1.39 billion.

BlackRock, which has increased earnings in seven straight quarters, collected a net $24.2 billion in new cash as investors fleeing sinking stock and bond markets deposited money into its funds. Merrill Lynch & Co., BlackRock's largest shareholder, shelved plans to sell its 49 percent stake, BlackRock said. Bloomberg

The asset gathering by their fixed income and equity funds was truly remarkable; who is getting these kinds of inflows? This franchise is known to be market wise, and the bid under the stock is rock solid as well.

Investors poured $16.7 billion into BlackRock’s bond funds, $6 billion into equity portfolios and $1.5 billion into real estate and hedge-fund products. Money funds had outflows of $4.6 billion in the quarter, although BlackRock said it brought in $7.3 billion in cash-fund deposits after June 30.

BlackRock garnered $43.6 billion in advisory assets, as investors sought advice on distressed portfolios. The company was picked March 24 by the Federal Reserve to oversee $30 billion of Bear Stearns Cos.’ investments after the fifth- largest U.S. securities firm agreed to be acquired by JPMorgan Chase & Co. The company has also been called in by UBS AG to help manage mortgage assets.

If you have any remaining doubts that some of the short selling against financials was overdone, just take a look at this situation. The stock bottomed earlier this month as traders pressed their bet that Merrill’s assets sales crush the shares, but they were late to the game:

July 7th
The Street has been shooting against Blackrock for weeks now, but the selling has really picked up speed over the past few days. But pressing the trade to the shortside might be getting a little dangerous. After all, who does not know this story by now?

You had your chance to buy the stock, and I hope you took it. Longer-term the company will have to contemplate Merrill’s situation; John Thain might not be out of the woods just yet, and overhang concerns have not permanently disappeared.

But for now the stock is ripping, and it is all good.

Wow!

Anyone with a position in the stock has had this day circled on the calendar for weeks; traders have had a chance to play both sides of this stock, and now longer-term shareholders can sit and wait for eventual 52-week highs. The rally over the past 48 hours has been remarkable, but new highs might require a bit more patience.
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Earnings gains, alone, could eventually drive the stock to new 52-week highs. Who needs multiple expansion when assets are growing like this? Patienece required, but what a franchise.

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BlackRock Earnings Rise 23% as Investors Seek Haven
Bloomberg

BlackRock Reports Second Quarter Diluted EPS of $2.05
Business Wire

Previously

July 7th
Blackrock Beatdown Getting Late in the Game?
1440 Wall Street
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