In the late 1980s, eight people met to discuss a business venture that would change Wall Street forever.
A small asset manager named Blackstone (BX) believed in their vision when no one else did.
Blackstone agreed to loan the eight founders of this business venture $5 million. And in exchange, it cost them almost half of their new business.
This startup company is now the world’s largest asset manager.
You now know it today as BlackRock (BLK), the most influential firm on Wall Street.
And that level of influence doesn’t come without controversy – as you can see in the following news headlines…
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“BlackRock Barges into Corporate Boardrooms” – Politico, July 2021
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“BlackRock Punishes 53 Companies over Climate Inaction” – Financial Times, July 2020
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“BlackRock Vies for the 2022 Corporate Hall of Shame” – Corporate Accountability, June 2022
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“BlackRock: The Secret Company that Owns the World” – Medium, October 2021
Some people even call BlackRock the fourth branch of the U.S. government… Because its grown so powerful and influential.
So today I will answer the question that’s been on the mind of countless investors – does BlackRock really own and control most of the U.S. stock market?
The truth might be uncomfortable, but it’s also profitable.
The Uncomfortable Truth
The top four investment firms in the U.S. manage $24.5 trillion.
That’s over half the value of the U.S. stock market. And about a quarter of the entire world’s combined stock markets.
And BlackRock is king of the mountain.
It has an incredible amount of power and influence.
Between all its investment funds, BlackRock owns at least 5% of all but a few companies in the S&P 500 index.
And BlackRock has so many shares in different companies that it can demand a seat on the Board of Directors of almost any company in the S&P 500.
Remember, it’s the Board of Directors, not the CEO, that decide what a company does.
And with a Board seat, BlackRock can alter the path of the world’s most important companies.
It owns 416 million shares of Google (GOOG), giving it a 7% stake.
And BlackRock owns 6.2% of Apple (AAPL), which is the largest company in the world by market cap.
Pick any other S&P 500 company, and odds are – the story is the same.
And if BlackRock can be on the board of any S&P 500 company, it can control the direction of almost any company.
In fact, BlackRock changed the direction of an entire industry starting in 2018.
Larry Fink, BlackRock’s CEO, famously stated that it was “putting executives on notice” and would begin scrutinizing how companies manage environmental and social policies.
Union Pacific Group (UNP), DuPont de Nemours, Inc (DD) and General Electric (GE) are among the many companies that fought back against BlackRock.
But most failed, including Union Pacific and DuPont.
BlackRock’s board seats gave them the kind of control politicians can only dream of.
The company put 244 energy companies on watch for “insufficient progress” on climate change.
And if Directors didn’t get on board with BlackRock’s agenda, they weren’t likely to be around for long.
As a result, BlackRock is well on its way to reshaping the entire energy industry. All without one election or a single vote by any U.S. citizens.
Meanwhile it’s taken decades for Congress to do anything. And when something finally does pass, the other side of the political aisle waters it down.
So, is it true? Does BlackRock really own – and control – most of the U.S. stock market and economy?
The Answer to the Question
The answer is no and yes. BlackRock does not own most of these shares. It only controls them.
I’ll explain the difference, and why it matters.
Regular people invest in exchange traded funds (ETFs) and mutual funds sponsored by the likes of BlackRock.
So it’s really you and I that own these shares. Not BlackRock.
But by buying ETFs instead of the individual stocks within them, something changes…
We give our voting power to BlackRock.
This is BlackRock’s strategy – to capture the maximum amount of influence it can.
BlackRock’s market cap is $99 billion. A large number no doubt, but it’s only a tiny fraction of Apple (AAPL), Google (GOOG), and Amazon (AMZN)’s market cap.
All three have market caps above $1.4 trillion, or 14x greater.
So how is BlackRock so powerful? Thanks to how ETFs and mutual funds work, it has far more influence than its market cap would ever suggest.
BlackRock controls the shares owned by all of its ETFs and mutual funds.
All $9.1 trillion of it.
And since the Board of Directors is voted in by shareholders of these ETFs and mutual funds – which it controls – BlackRock calls the shots.
It’s the greatest “backdoor” to power in Wall Street history.
If BlackRock decides it doesn’t like an industry… It can move mountains (of cash) to make its life very difficult – just like a branch of the U.S. government.
Except it doesn’t need to deal with elections or voters to get its way…
Profit From the Most Influential Player on Wall Street
So how can you profit from the most influential player on Wall Street?
You can buy its dividend paying stock at a discount.
Right now, BlackRock is trading cheaper than its historical average thanks to the 17% share price decline in the last year.
BlackRock’s dividend has increased 51.5% since the end of 2019. And is up 160% since the start of 2014.
That’s fueled the stock’s outperformance of the S&P 500 in most periods, including the past five years.
And the total assets it controls have risen rapidly. Exponential growth is inevitable for this company. And its near monopoly on the stock market means it’s only going to continue experiencing this growth long term.
So if you want to profit from this powerful and influential player while receiving a 3% dividend yield, now is a great time to buy.
But if BlackRock’s influence has you up at night, you don’t have to be at their mercy.
For members of our Intelligent Income Investor, we recommended a company that BlackRock cannot control.
And just to give you some context, let’s compare it to Nvidia (NVDA).
The founder and CEO of Nvidia, Jen Hsun Hang, owns a 3.51% stake in the semiconductor/artificial intelligence company he started. That’s higher stake than BlackRock in Nvidia.
Meanwhile the founding family of the company we’ve recommended in our Intelligent Income Investor, controls over 71 million of its shares, worth over $14 billion.
With the founding family controlling a significant portion of the Board and common shares, nobody can derail their plans. Not even BlackRock, who owns a much smaller stake than the family.
And its dividend per share has increased 100% since the start of the pandemic. That’s much greater than BlackRock’s increase over the same time frame.
So if you want to find out the name of this company and learn more about the Intelligent Income Investor service, click here.
Safe Investing,
Stephen Hester
Analyst, Intelligent Income Daily