Blackrock and Portfolio Diversification

I recently sold my (small) holding in Archer Daniels Midland (ADM) for breakeven. As of today it appears that I sold too soon, since it has moved up 3.5%. Nevertheless, the reason I sold is because I already have an agricultural investment, being apple orchard company Scales on the NZX. As written in previous articles, I like to practice sector diversification. In this article I do a brief on some of what I have in different sectors, and why I have landed on Blackrock as the best stock to take the place of ADM.

Starting off with property, I am probably a bit over-exposed at the moment, as I have the Aussie Property Fund, Goodman, Investore, Property for Industry and Realty Income. These holdings give me exposure to different types of property like Industrial and retail, along with exposure to different localities. I like the high yield of property stocks, and the ability to reinvest those dividends. In healthcare I have Ebos Group and United Healthcare (UNH). Ebos recently lost Chemist Warehouse as a client, and this has dented the share price quite a bit. UNH is the largest healthcare company worldwide and operates across the Americas principally in healthcare insurance. In Transportation I have Freightways, which is generally a well run company. In Industrials I have Fletcher Building and Scott Technology, both of which I like and whose dividends I reinvest. In Tech I only have IkeGPS at the moment, as my broad market index ETFs are market-cap weighted towards tech anyway, so I don't feel that I have to own many individual tech names. Over the past year, this has not been great thinking since the tech sector has been the best performer. Of course, by owning broad market ETFs such as the Total World Fund, I get some exposure to every industry.

As I briefly mentioned in the first paragraph, I probably made the wrong decision to sell ADM. Another stock I recently sold was Alphabet, which has gone up 6% in the after-hours today on the back of a good earnings report. Time and time again, you will likely notice this common trend happening throughout your investment life, while you may think that you have to be constantly buying and selling, the best money is more often than not made by sitting on your hands and doing nothing. Warren Buffett has alluded to this in every book I have read about him. And this is why Blackrock is the best next investment I can make. Blackrock began its journey as an offshoot of Blackstone in the 1988. Blackstone was created in 1985 as a investment company primarily focused on private equity opportunities. From this they moved onto distressed debt, and then real estate and hedge funds. Today they manage around $1 billion in client funds. Blackrock on the other hand are focused on equities, fixed-income, ETFs and mutual funds. They directly manage $10 trillion of client funds, and oversee 30% of the worlds stock markets through their Aladdin software. Aladdin was created early on in their existence as a way to track their own investment portfolio, but was soon recognized as a great way to collect data and monitor the financial markets in general. Today this is a big part of their business and its algorithm is used to weight the stock market indices by capitalization. iShares is their ETF funds company and is the largest in the world, indirectly managing $2.3 trillion of funds. They operate in 36 countries, and have $113 billion in market cap.

Blackrock is the perfect investment because it is very diversified. And what better way to make a long-term investment, than by buying the very company that runs a major part of the financial markets infrastructure. In fact only one other company rivals Blackrock in my eyes. And this company is one Berkshire Hathaway, which will be the subject of my next article.