In 2005 it acquired State Street Research & Management; in '06 it merged with Merrill Lynch Investment Managers, and last year it bought fund-of-funds manager Quellos Group. Today BlackRock's $1.4 trillion of managed assets are divided among fixed-income products (38%), equities (31%), money-market funds (26%) and alternative investments (5%).
The diversification reflects CEO Fink's view that clients want fewer, more comprehensive relationships, and the opportunity to invest in multiple asset classes. "We've had pretty good success at cross-selling products," he says, pointing to net inflows of $138 billion last year.
With losses piling up at many Wall Street firms, BlackRock reported a 131% jump in 2007 revenue, to $4.8 billion. Earnings more than tripled, to $995 million.
The company took no write-offs related to the subprime-mortgage meltdown; neither did its funds require bailouts. But some closed-end BlackRock funds sold auction-rate preferred stock, which has stopped trading amid an effective shutdown of the auction-rate-securities market. Until the situation is resolved, it will be tough for BlackRock -- and many other asset managers -- to sell new closed-end funds.
In this year's first quarter BlackRock's earnings missed expectations. The company netted $1.82 a share, up from $1.48 a year ago, but below analysts' targets of $2.01. "If global capital markets decline or there's a recession, we will feel that chill," says Fink, who helped found BlackRock in 1988.
Over a five- or 10-year cycle, however, the company is likely to grow faster than the markets, generously rewarding investors with a long-term view.
Research In Motion
Being in the right place at the right time turned Research In Motion into a technology titan and helped it earn second place in our rankings. The company's BlackBerry, introduced in 1999, has become the standard in handheld devices, delivering e-mail, Internet connectivity, music and video.
RIM's net income and revenue doubled in the fiscal year ended March 1. The Waterloo, Ont.-based company earned $1.29 billion on sales of $6 billion. Its shares have almost tripled in the past year. "We're fortunate to be in a leadership position in a really hot sector," says James Balsillie, Research In Motion's co-CEO.
IDC estimates the sector's growth will continue, compounding at a rate of 30% a year through 2011.
RIM's shares sold off sharply earlier this year amid fears that a consumer-led economic slowdown and competition from Apple's iPhone could crimp the BlackBerry's growth. But the company laid those fears to rest, for now, with a bang-up fiscal fourth quarter and a rosy estimate for the current period. "Smart communication technology has become a necessity in how people live," says Balsillie.
Clockwise from top left: Eric Millette; courtesy of Schlumberger; courtesy of Research in Motion (Balsillie, Lazaridis); courtesy of National Oil Well Varco
Clockwise, from top left: Charles Schwab, CEO, Charles Schwab; Andrew Gould, CEO, Schlumberger; Michael Lazaridis, co-CEO, RIM; James Balsillie, co-CEO, RIM; Merrill Miller, CEO, National Oilwell Varco
Once focused on selling just to corporations, Research In Motion has jumped feet first into the consumer market, which now accounts for 38% of its subscriber base. It also hasn't hurt that two major competitors, Motorola and Palm, have stubbed their toes.
Balsillie plans to stay ahead of the crowd and fight price declines by packing more and more capabilities into the BlackBerry. Offering more functionality "is the best antidote to competition," he says.
RIM trades for a rich 35 times fiscal '09 estimates of $3.80, and 26 times '10 projections of $5.05. Short-term-oriented traders might want to wait for a better entry point, says Susan Kalla, portfolio manager at KHX Investments, which owns the shares.
But over the longer term, the RIM's stock could still be a big winner. Someday, she says, "everybody will have a smart phone, and Research In Motion is a category leader." That day could come much sooner than many now imagine it will.
National Oilwell Varco
In the California gold rush, suppliers of picks and shovels fared far better than prospectors. The same might be said of the oil patch; just ask National Oilwell Varco, a supplier of oil and gas drilling-rig equipment, whose revenue more than tripled in the past four years, to $9.8 billion. The Houston company's earnings rose more than 500%, to $3.76 a share, and its backlog of business grew to $9.9 billion in the first quarter, up from $2.3 billion in 2005.
Some of that growth was due to acquisitions. In March 2005 National Oilwell purchased Varco for $2.59 billion in stock. The combined company bulked up even more this past April, when it completed the $7 billion takeover of Grant Prideco, adding drill bits and drill pipe to its product line-up.
National Oilwell's growth stems in part from improved manufacturing efficiencies. A factory that turned out 95 to 100 top drives (the part that turns the drilling pipe) three years ago now manufactures 365, with only a modest capital investment of $1 million to $1.5 million, says Merrill (Pete) Miller, chairman and CEO. The company espouses "quick response manufacturing," an approach to enhancing efficiency developed at the University of Wisconsin.
National Oilwell's stock has climbed 67% in the past 12 months, as oil has breached new highs above $120 a barrel. Yet the shares trade at only 13.5 times Wall Street's 2009 earning estimates.