Does Charles Schwab Corp (SCHW) Offer Investors Safety?

Daily Active Trades (number of trades made on a daily basis) have improved for Charles Schwab. I’ll refer to Daily Active Trades as DAT from this point forward. In April, DAT improved 2% year over year. And in May, DAT improved 17% year over year. Have you noticed the stock’s significant upward move over the past month and a half? This isn’t a coincidence. However, those aren’t the only positives. Below is a chart showing more important numbers for May:

Source: Charles Schwab.

Overall, those are impressive numbers.

Other positives for Charles Schwab include revenue stream diversification, product and service innovation, and strategic acquisitions.

The biggest negatives have been higher operating expenses and increased loan loss provisions.

It should also be noted that interest rates still play a big role. Charles Schwab wants to see higher rates so it makes more profit on loans. The catch here is that the stock market often falls when interest rates increase. This has been true since time eternal. Therefore, pundits who think higher interest rates will help the stock market are likely being overly ambitious. If interest rates increase and the stock market falls, then it will impact Charles Schwab in a negative manner, because fewer retail traders would be interested in the company’s services.

Conclusion

Charles Schwab Corp (NYSE:SCHW) is enjoying strong upside momentum at the moment. Though the stock is a little expensive, it still looks to be a worthwhile investment.

Charles Schwab has $34.37 billion in cash and short-term equivalents versus $1.63 billion in long-term debt. This strong cash position opens many doors. If the market were to turn to the downside, Charles Schwab could return more capital to shareholders through increased dividends and/or stock buybacks.

If the stock market performs well, then Charles Schwab should build on its current momentum.

The article Does Charles Schwab Offer Investors Safety? originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends TD Ameritrade. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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