3 BlackRock Mutual Funds to Bet on as Volatility Continues
In recent weeks, Wall Street has been rising and falling on the basis of whether the Fed would continue to raise interest rates. Even as recent readings of various inflation metrics have confirmed that prices are on their way down, they are still way below the Fed’s target rate of 2%. In such a scenario, whenever important consumer sectors like retail sales show strength, it is a red flag for the central bank, and it is motivated to clamp down on the purchasing power of consumers by raising interest rates.
As reported by the U.S. Census Bureau, the dollar value of purchases made at retail stores, or retail sales for July, came in at 0.7% growth for the period. This is almost double the expectations, which was pitted at a 0.4% increase for the period. The market reacted unfavorably to the report as last week’s positivity around the inflation numbers subsided, and investors turned apprehensive about further rate hikes by the Fed.
This continued market volatility has led to risk-off positioning, with many investors shifting from equity products to much safer fixed-income and money market mutual funds, which also have lower fees than equities. BlackRock Inc., one of the world’s largest asset managers, is poised to make the most of these opportunities.
BlackRock reported that it had $9.43 trillion worth of assets under management as of Jun 30, 2023, as it beat earnings estimates in the second quarter. This is significantly higher than the $9.09 trillion it had reported last quarter. For the quarter, BLK reported adjusted earnings of $9.28/ share, widely surpassing the Zacks Consensus Estimate of $8.47.
BLK’s persistent efforts to strengthen iShares and ETF operations, alongside its initiatives to restructure the actively managed equity business, are expected to continue aiding growth for the company. Add to that strong earnings numbers and an iron-clad reputation, and the financial giant is well-positioned to counter any headwind from global macroeconomic factors like its exposure to the Chinese property crisis.
What also helps is that the company continues to cut costs as its expenses decline. Total expenses for BLK in the second quarter of 2023 amounted to $2.85 billion. Our estimate for the same was pegged at $3 billion. The decline can be attributed to a fall in all cost components, including general and administrative expenses.
Investing in these mutual funds may provide the much-required stability and growth potential in a market that is expected to remain volatile for a while. Hence, astute investors should consider such funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns and minimum initial investments within $5000 as well as carry a low expense ratio.
BlackRock International Dividend Fund BREAX seeks long-term capital appreciation by investing the majority of its net assets in dividend-paying equity securities issued by international emerging capitalization companies. BREAX also invests part of its net assets in stocks of issuers in emerging market countries and offers dividends on a quarterly basis.
Olivia Treharne has been the lead manager of BREAX since February 2020. The three top holdings for BREAX are 4.1% each in Sanofi, Novo Nordisk and Reckitt Benckiser.
BREAX’s 3-year and 5-year annualized returns are 8.2% and 6.5%, respectively, and its net expense ratio is 0.90% compared to the category average of 0.92%. BREAX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
BlackRock Mid-Cap Value Fund MRRFX primarily invests in a diversified portfolio of dividend-paying equity securities of mid-cap companies. MRRFX seeks capital appreciation and intends to generate income by investing in securities that the fund manager believes are undervalued and, therefore, represent an investment value. Dividends and any net realized capital gains are distributed annually.
Tony DeSpirito has been the lead manager of MRRFX since June 2017. The three top holdings for MRRFX are 2.8% in Baxter International, 2.2% in Cognizant and 2.1% in SS&C Technologies.
MRRFX’s 3-year and 5-year annualized returns are 18.2% and 9.2%, respectively, and its net expense ratio is 0.69% compared to the category average of 1.01%. MRRFX has a Zacks Mutual Fund Rank #1.
BlackRock Floating Rate Income Fund BFRAX invests the majority of its assets in floating rate investments and other economically similar investments, which enable the fund to achieve a floating rate of income. BFRAX also invests in senior floating rate loans or second lien floating rate loans.
Mitchell Garfin has been the lead manager of BFRAX since August 2018. The three top holdings for BFRAX are 0.9% in Sunshine Luxemnourg, 0.9% in Cloud Software and 0.8% in Medline Borrower.
BFRAX’s 3-year and 5-year annualized returns are 5.2% and 3.5%, respectively, and its net expense ratio is 0.95% compared to the category average of 1.03%. BFRAX has a Zacks Mutual Fund Rank #1.
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