Continue Following the Right-Sizing Trend

Many companies expanded during the past few years, amid unprecedented government stimulus checks and easy money policies. Now, many companies have found that rapid growth is a bit more elusive over the long haul. They’re cutting back on employees.

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  • That trend is right-sizing companies that may have over-expanded on employees in recent years. That’s been seen primarily with big tech. But the current slowdown is also starting to be seen with financial companies as well.

    The latest is asset manager BlackRock (BLK). They’re looking to lay off about 500 employees, or 3 percent of staff. The company saw a 15 percent drop in both revenue and earnings last year, as the stock and bond markets declined.

    However, the company sports a 30 percent profit margin, and has been the long-term winner in the asset management space. With shares trading at their best valuation in two years, the stock is starting to look attractive before the company lowers its staff costs.

    Action to take: Long-term investors can buy shares with a 2.8 percent starting dividend now, up from a 2.4 percent average over the past 5 years. The company pays out about half its earnings as dividends, and has grown them over time.

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  • For traders, shares look likely to move higher in the coming months, continuing the current trend higher since October. While not cheap in dollar terms, the July $800 calls, last going for about $52.50, offer mid-double-digit returns in the coming months on a further move higher.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.