At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not The Charles Schwab Corporation (NYSE:SCHW) makes for a good investment right now.
Is SCHW stock a buy or sell? The Charles Schwab Corporation (NYSE:SCHW) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. The Charles Schwab Corporation (NYSE:SCHW) was in 61 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 71. There were 53 hedge funds in our database with SCHW holdings at the end of September. Our calculations also showed that SCHW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
David Blood of Generation Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). Now let’s take a peek at the latest hedge fund action regarding The Charles Schwab Corporation (NYSE:SCHW).
Do Hedge Funds Think SCHW Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SCHW over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Generation Investment Management was the largest shareholder of The Charles Schwab Corporation (NYSE:SCHW), with a stake worth $1483.8 million reported as of the end of December. Trailing Generation Investment Management was Diamond Hill Capital, which amassed a stake valued at $469.4 million. Route One Investment Company, Southpoint Capital Advisors, and Yacktman Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to The Charles Schwab Corporation (NYSE:SCHW), around 15.27% of its 13F portfolio. JNE Partners is also relatively very bullish on the stock, designating 13.82 percent of its 13F equity portfolio to SCHW.
As aggregate interest increased, key hedge funds have jumped into The Charles Schwab Corporation (NYSE:SCHW) headfirst. Southpoint Capital Advisors, managed by John Smith Clark, assembled the largest position in The Charles Schwab Corporation (NYSE:SCHW). Southpoint Capital Advisors had $212.2 million invested in the company at the end of the quarter. Tom Purcell and Marco Tablada’s Alua Capital Management also initiated a $87.7 million position during the quarter. The following funds were also among the new SCHW investors: James Parsons’s Junto Capital Management, Steve Cohen’s Point72 Asset Management, and Joe Magyer’s Lakehouse Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Charles Schwab Corporation (NYSE:SCHW) but similarly valued. We will take a look at Lockheed Martin Corporation (NYSE:LMT), Caterpillar Inc. (NYSE:CAT), Square, Inc. (NYSE:SQ), American Express Company (NYSE:AXP), Zoom Video Communications, Inc. (NASDAQ:ZM), The Estee Lauder Companies Inc (NYSE:EL), and Intuitive Surgical, Inc. (NASDAQ:ISRG). This group of stocks’ market values resemble SCHW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LMT | 53 | 2527739 | 6 |
| CAT | 53 | 4157844 | 12 |
| SQ | 89 | 8819199 | 16 |
| AXP | 60 | 21887073 | 12 |
| ZM | 59 | 6002261 | 3 |
| EL | 51 | 3593398 | 5 |
| ISRG | 49 | 1802145 | -1 |
| Average | 59.1 | 6969951 | 7.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 59.1 hedge funds with bullish positions and the average amount invested in these stocks was $6970 million. That figure was $4473 million in SCHW’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Intuitive Surgical, Inc. (NASDAQ:ISRG) is the least popular one with only 49 bullish hedge fund positions. The Charles Schwab Corporation (NYSE:SCHW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SCHW is 50.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on SCHW as the stock returned 24.9% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Schwab Charles Corp (NYSE:SCHW)
Follow Schwab Charles Corp (NYSE:SCHW)
Disclosure: None. This article was originally published at Insider Monkey.
