BROKERS’ NOTES: Buy BlackRock, avoid MultiChoice

Gary Booysen, portfolio manager: Rand Swiss

Buy: BlackRock 

BlackRock is the world’s largest asset manager, with about $9.4-trillion in assets under management (AUM). That’s about a third of the US’s total national debt. A $10-trillion stack of $1 bills would reach halfway to the moon. I don’t even want to think about it in rand terms.

Its size is important, because there are significant economies of scale in the asset management industry. The larger a firm’s AUM, the cheaper the unit cost of production. This scale gives BlackRock an almost unassailable moat when it comes to product pricing. At the same time, as artificial intelligence (AI) technology accelerates, large product houses will be able to offer ever more compelling direct offerings. 

These days almost anyone can buy BlackRock products by tapping a few buttons on a smartphone. The firm’s Aladdin technology, launched in 1999, is still the platform of choice for banks like Citi and BNP Paribas and for a host of other market participants. 

From a shareholder point of view, you’re paying a fair price for a very high-quality company at about six times its revenue and 20 times its earnings. In the most recent letter to shareholders CEO Larry Fink says: “We are proud to be the highest-performing financial services stock in the S&P 500 since our IPO in 1999, delivering a total return of 7,700%.” There is no reason to expect this to change any time soon. 

Avoid: MultiChoice

The media and entertainment sector is a tough space at the best of times. Today competition for your attention is fiercer than ever. Everyone wants your eyeballs on their content now. Honestly, I find it miraculous that you’re even reading this! You not only have the streaming giants like Amazon Prime Video, Netflix and Disney+ offering you content, you also have social networks like Meta’s Instagram, Microsoft’s LinkedIn and Alphabet’s YouTube offering you access to everything — instantly, and often for free.

Many of these companies are now applying leading AI modules and advanced algorithmic data management techniques to ensure your attention stays with them. And I’m not even going to start with the future of entertainment through big gaming tech companies like Activision Blizzard and Electronic Arts.

In this world, MultiChoice’s offering seems a long way behind the curve. The share price performance this year has been dismal; the stock is down 34% over the past 12 months.  We don’t see a recovery any time soon. In fact, the new Comcast deal and the big bets that MultiChoice is taking on the future of Showmax add significant execution risk to the outlook. For now, avoid.