Displaying items by tag: Blackrock
Advisors will see it first hand, but it is still worth discussing the intensification of the current ETF price war. While the industry has been slashing fees for years, things have escalated significantly over the last few months. State Street has introduced a suite of ultra cheap funds, but more recently, BlackRock and Vanguard have made major moves. BlackRock cut fees on several stock and bond ETFs last month, and just last week, Vanguard announced that almost every ETF on its platform would be commission-free. The ETF market is supposed to grow to $10 tn in the next decade, and fees have fallen 30% in the last decade.
FINSUM: This is great news for investors, but it will certainly drive further consolidation in the ETF business as massive scale is needed to support these prices cuts. We ultimately worry about such imbalance in the market.
Morgan Stanley has put out a unique list of stocks. The bank has published a piece outlining what it sees as the thirty best stocks for the medium term. The picks are based on having a sustainable competitive advantage and were viewed as having the best chance in this sideways-moving market. Some of the picks include: Accenture, Alphabet, BlackRock, BNY Mellon, Charles Schwab, Dollar General, JP Morgan, Microsoft, Salesforce.com.
FINSUM: This is a very interesting list, especially because it is cross-sector (which does not happen as much given the sector-first structure of equity research). It was also particularly useful that many of these names are in wealth or asset management, allowing advisors special insight.
There is a lot of consternation in the market about the direction of equities. Some fear for returns as higher rates and the possibility of a recession become clearer. However, the world’s largest asset manager has just come forth with position that sticks with US equities. The best way to summarize BlackRock’s view is that it thinks “fears of peaking earnings are overdone”. The manager believes that worries over macro concerns have overshadowed very strong fundamental performance.
FINSUM: So the question is how much of the great earning performance was simply because of the tax cut, and how much came from an improvement in the underlying businesses. That is key to understand before predicting where the market is headed.
Despite the rally, stocks are still down 5% from the January peak. But Invesco, it is down around 15%, which Barron’s argues presents a great buying opportunity. Invesco’s mutual fund business will earn less income if stocks fall, but unlike others, it may be a big beneficiary of the next bear market. Two reasons for this include Invesco having a strong balance sheet to make low-priced acquisitions when times are tough (as it did during the Crisis) and the fact that it has a great smart beta business, which should do well in tough times. The stock currently trades at a 44% discount to BlackRock on an earnings multiple basis, making the price attractive.
FINSUM: Invesco seems like it would be good to use in a pair trade in a down turn as its relative performance should be better than competitors.
In an article that addresses an issue unknown to us—that Americans don’t give US stocks enough love (?!)—BlackRock says that investors should buy American stocks in some select sectors. BlackRock says that “We have upgraded our tactical view of U.S. equities to overweight from neutral” continuing “The reason: Impending fiscal stimulus is supercharging U.S. earnings growth expectations”. Blackrock says it likes American tech stocks, US financials, and momentum and value plays.
FINSUM: US stocks surely haven’t been short on love over the last year, but we suspect BlackRock just means in the last few weeks. In that perspective, we agree that things aren’t as bearish as many fear.