Better buy after a tough 2022

Blackstone (NYSE: BX) and Blackrock (NYSE: BLK) stock prices had a difficult performance in 2022 as the two companies faced different challenges. Blackrock’s total return in 2022 was minus 20.92% while Blackstone’s was minus -40%. So, in this Blackstone vs Blackrock analysis, we will assess the better asset management firm to invest in.

Blackrock vs Blackstone

Blackstone and Blackrock are some of the biggest finance companies in the world with over $961 billion and $9 trillion in assets under management (AUM), respectively. The two firms have a similar heritage since Blackrock’s Larry Fink left Blackstone to start his firm. 

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They nonetheless operate in different industries. Blackstone’s business is in real estate, private equity, hedge fund solutions, and credit and insurance. On the other hand, Blackrock’s business is in equity, fixed income, multi-asset, alternatives, cash management, and advisory. Blackrock is one of the biggest investors in publicly-traded companies in the US.

The two companies faced important challenges in 2022. Blackrock came under fire from conservatives, who criticized the company for ignoring companies in the oil and gas. Florida’s treasurer voted to withdraw $2 billion in funds from the company.

Blackstone, on the other hand, was affected by high-interest rates and a liquidity crunch in its BREIT business. Its BREIT returns rose by 5% while publicly-traded REITs shed over 30% of their value, as we wrote here. As a result, many investors moved to redeem some of their funds. With real estate being highly illiquid, the company placed limits on the amount of withdrawals.

Which is a better investment?

In terms of size, Blackrock has a market cap of over $105 billion compared to Blackstone’s $87 billion. The two have 19,900 and 3,795 employees, respectively. Meanwhile, Blackrock has a dividend yield of 2.77% while Blackstone yields 4.81%. Blackstone has also grown its dividend by 16% in the past 3 years compared to Blackrock’s 14%. Therefore, Blackstone wins in terms of dividend payouts to shareholders.

Blackrock always trades at a premium valuation compared to Blackstone. It has a forward PE ratio of 20.59 compared to Blackrock’s 20.59. 

I believe that both BLK and BX are outstanding companies in their industries. Also, the ESG and BREIT challenges are only temporary in nature. For one, Blackrock still manages trillions of dollars for conservative states. 

While the two are quality companies, I believe that Blackrock is a better investment than Blackstone. For one, the company has a growing private equity business that has $41 billion in assets under management. Further, Blackrock’s business is more liquid than Blackstone. 

Finally, its Aladdin Platform has more room for growth in the financial industry. It is a piece of software that provides trade execution, investment operations, portfolio management, and analysis & risk management solutions. It is used by thousands of financial professionals globally.