SCHW – ReportWire

Charles Schwab stock drops after revenue falls a bit shy of expectations, amid trading weakness

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Shares of Charles Schwab Corp.
SCHW,
+5.42%
fell 1.5% toward a five-month low in premarket trading Monday, after the financial services and discount brokerage giant beat third-quarter profit expectations but fell a bit shy on revenue. Net income dropped to $1.02 billion, or 56 cents a share, from $1.88 billion, or 99 cents a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of 77 cents beat the FactSet consensus of 74 cents. Revenue declined 16.3% to $4.606 billion, below the FactSet consensus of $4.615 billion. Net interest revenue fell 23.5% to $2.237 billion to beat the FactSet consensus of $2.218 billion, while asset management and administration fee revenue rose 16.9% to $1.224 billion, in line with expectations, and trading revenue was down 17.4% to $768 million to miss expectations of $804 million. New brokerage accounts were flat from a year ago but down 7% from the sequential second quarter. The stock has declined 12.3% over the past three months through Friday while the S&P 500
SPX,
+1.19%
has slipped 3.9%.

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October 16, 2023

These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations

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Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.

First we will show how the sectors of the S&P 500

have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.

Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.

Sector or index	2023 return	2022 return	Return since end of 2021	1 week return	1 month return
Utilities	-18.4%	1.6%	-17.2%	-11.1%	-9.6%
Real Estate	-7.1%	-26.1%	-31.4%	-3.0%	-8.8%
Consumer Staples	-5.4%	-0.6%	-6.0%	-2.2%	-4.4%
Healthcare	-4.2%	-2.0%	-6.1%	-1.7%	-3.3%
Financials	-2.5%	-10.5%	-12.7%	-2.5%	-4.7%
Materials	1.3%	-12.3%	-11.2%	-1.9%	-7.0%
Industrials	3.5%	-5.5%	-2.1%	-1.8%	-7.3%
Energy	4.0%	65.7%	72.4%	-1.9%	-1.4%
Consumer Discretionary	27.0%	-37.0%	-20.0%	-0.6%	-5.2%
Information Technology	36.5%	-28.2%	-2.0%	0.8%	-5.9%
Communication Services	42.5%	-39.9%	-14.3%	1.1%	-1.3%

S&P 500	13.1%	-18.1%	-7.4%	-1.1%	-4.9%
DJ Industrial Average	2.5%	-6.9%	-4.5%	-1.7%	-4.0%
Nasdaq Composite Index COMP	28.0%	-32.5%	-13.7%	0.3%	-5.1%
Nasdaq-100 Index	36.5%	-32.4%	-7.7%	0.5%	-4.2%
Source: FactSet

Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
GOOGL
and Meta Platforms Inc.
META,
which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.

On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.

Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.

The yield on 10-year U.S. Treasury notes

jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds

rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.

Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007

The Treasury yield curve is still inverted, with 3-month T-bills

yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.

Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”

Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:

Odeon Capital Group, Bloomberg

Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.

This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.

We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.

Screening for lower valuations and high ratings

A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.

Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:

Sector or index	Current P/E to 5-year average	Current P/E to 10-year average	Current P/E to 15-year average	Forward P/E	5-year average P/E	10-year average P/E	15-year average P/E
Utilities	82%	86%	95%	14.99	18.30	17.40	15.82
Real Estate	76%	80%	81%	15.19	19.86	18.89	18.72
Consumer Staples	93%	96%	105%	18.61	19.92	19.30	17.64
Healthcare	103%	104%	115%	16.99	16.46	16.34	14.72
Financials	88%	92%	97%	12.90	14.65	14.08	13.26
Materials	100%	103%	111%	16.91	16.98	16.42	15.27
Industrials	88%	96%	105%	17.38	19.84	18.16	16.56
Energy	106%	63%	73%	11.78	11.17	18.80	16.23
Consumer Discretionary	79%	95%	109%	24.09	30.41	25.39	22.10
Information Technology	109%	130%	146%	24.20	22.17	18.55	16.54
Communication Services	86%	86%	94%	16.41	19.09	19.00	17.43

S&P 500	94%	101%	112%	17.94	19.01	17.76	16.04
DJ Industrial Average	93%	98%	107%	16.25	17.49	16.54	15.17
Nasdaq Composite Index	92%	102%	102%	24.62	26.71	24.18	24.18
Nasdaq-100 Index	97%	110%	126%	24.40	25.23	22.14	19.43

There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.

If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.

Your own opinions, along with the pricing for some sectors, might drive some investment choices.

A broader screen of the S&P 500 might point to companies for you to research further.

We narrowed the S&P 500 as follows:

Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.
“Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.

Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.

There is too much data for one table, so first we will show the P/E information:

Company	Ticker	Current P/E to 5-year average	Current P/E to 10-year average	Current P/E to 15-year average
SolarEdge Technologies Inc.	SEDG	89%	N/A	N/A
AES Corp.	AES	66%	75%	90%
Insulet Corp.	PODD	18%	N/A	N/A
United Airlines Holdings Inc.	UAL	42%	50%	N/A
Alaska Air Group Inc.	ALK	51%	57%	N/A
Tapestry Inc.	TPR	39%	49%	70%
Albemarle Corp.	ALB	39%	50%	73%
Delta Air Lines Inc.	DAL	60%	63%	21%
Alexandria Real Estate Equities Inc.	ARE	59%	68%	N/A
Las Vegas Sands Corp.	LVS	96%	78%	53%
Paycom Software Inc.	PAYC	61%	N/A	N/A
PayPal Holdings Inc.	PYPL	33%	N/A	N/A
SBA Communications Corp. Class A	SBAC	27%	N/A	N/A
Advanced Micro Devices Inc.	AMD	58%	39%	N/A
LKQ Corp.	LKQ	92%	44%	78%
Charles Schwab Corp.	SCHW	75%	54%	73%
PulteGroup Inc.	PHM	94%	47%	N/A
Lamb Weston Holdings Inc.	LW	71%	N/A	N/A
News Corp Class A	NWSA	93%	73%	N/A
CVS Health Corp.	CVS	75%	61%	67%
Source: FactSet

Click on the tickers for more about each company or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

News Corp
NWSA
is on the list. The company owns Dow Jones, which in turn owns MarketWatch.

Here’s the list again, with ratings and consensus price-target information:

Company	Ticker	Share “buy” ratings	Oct. 2 price	Consensus price target	Implied 12-month upside potential
SolarEdge Technologies Inc.	SEDG	74%	$122.56	$268.77	119%
AES Corp.	AES	79%	$14.16	$25.60	81%
Insulet Corp.	PODD	68%	$165.04	$279.00	69%
United Airlines Holdings Inc.	UAL	71%	$41.62	$69.52	67%
Alaska Air Group Inc.	ALK	87%	$36.83	$61.31	66%
Tapestry Inc.	TPR	75%	$28.58	$46.21	62%
Albemarle Corp.	ALB	81%	$162.41	$259.95	60%
Delta Air Lines Inc.	DAL	95%	$36.45	$58.11	59%
Alexandria Real Estate Equities Inc.	ARE	100%	$98.18	$149.45	52%
Las Vegas Sands Corp.	LVS	72%	$45.70	$68.15	49%
Paycom Software Inc.	PAYC	77%	$260.04	$384.89	48%
PayPal Holdings Inc.	PYPL	69%	$58.56	$86.38	48%
SBA Communications Corp. Class A	SBAC	68%	$198.24	$276.69	40%
Advanced Micro Devices Inc.	AMD	74%	$103.27	$143.07	39%
LKQ Corp.	LKQ	82%	$49.13	$67.13	37%
Charles Schwab Corp.	SCHW	77%	$53.55	$72.67	36%
PulteGroup Inc.	PHM	81%	$73.22	$98.60	35%
Lamb Weston Holdings Inc.	LW	100%	$92.23	$123.50	34%
News Corp Class A	NWSA	78%	$20.00	$26.42	32%
CVS Health Corp.	CVS	77%	$69.69	$90.88	30%
Source: FactSet

A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.

Don’t miss: This fund shows that industry expertise can help you make a lot of money in the stock market

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October 3, 2023

U.S. banks and regional lenders slide across the board as S&P is latest to downgrade ratings

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U.S. banks and regional banks fell across the board on Tuesday, after S&P Global Ratings downgraded five smaller players after a review of risk related to funding, liquidity and asset quality with a focus on office commercial real estate.

Adding to the gloom, Republic First Bancorp. Inc.’s stock
FRBK,
-41.90%
tanked by 39%, after Nasdaq told the company that its stock would be delisted on Wednesday, after it failed to file its annual report in time.

S&P’s move comes just days after Fitch Ratings analyst Christopher Wolfe reduced his operating environment score for U.S. banks to aa- from aa due to the unknown path of interest rate hikes and regulatory changes facing the sector.

And Moody’s Investors Service just two weeks ago upset investors when it downgraded some lenders and said it was reviewing ratings on bigger banks, including Bank of New York Mellon
BK,
-1.71%,
State Street
STT,
-1.59%
and Northern Trust
NTRS,
-1.73%.

For more, see: Bank asset quality, weaker profits spark Moody’s reviews and downgrades as it weighs potential 2024 recession

The S&P 500 Financials Sector has fallen for seven consecutive days, and is on pace for its longest losing streak since April 7, 2022, when it also fell for seven straight trading days.

Individual bank names are also performing poorly, with Goldman Sachs Group Inc.
GS,
-0.94%
and Citigroup Inc.
C,
-1.68%
down for 10 of the past 11 days and Charles Schwab Corp.
SCHW,
-4.84%
down 11 straight days.

Goldman alone has fallen for seven straight days for a total loss of 6.3%. It’s the longest losing streak since Feb. 28, 2020, when it also fell for seven straight days as the pandemic was taking hold.

The KBW Nasdaq Regional Banking Index
KBWR
is down for 11 straight days. and the KBW Nasdaq Bank Index
BKX
is down for seven straight days.

S&P downgraded Associated Banc. Corp.
ASB,
-4.20%,
Comerica Inc.
CMA,
-3.82%,
KeyCorp
KEY,
-3.58%,
UMB Financial Corp.
UMBF,
-2.42%
% and Valley National Bancorp.
VLY,
-4.19%
by one notch and said the outlook on all five is stable.

The rating agency affirmed ratings on Zions Bancorp
ZION,
-4.17%
and maintained a negative outlook, meaning it could downgrade them again in the near-term. And it affirmed ratings and a stable outlook on Synovus Financial Corp.
SNV,
-3.37%
and Truist Financial Corp.
TFC,
-1.36%

“We reviewed these 10 banks because we identified them as having potential risks in multiple areas that could make them less resilient than similarly rated peers ,” S&P said in a statement.

“For instance, some that have seen greater deterioration in funding—-as indicated by sharply higher costs or substantial dependence on wholesale funding and brokered deposits—-may also have below-peer profitability, high unrealized losses on their assets, or meaningful exposure to CRE.”

The steep rise in interest rates orchestrated by the Federal Reserve over the past year has raised deposit costs as banks are now competing for savers seeking higher returns and that’s forced some to pay up on deposits and discourage their clients from heading to other institutions and instruments.

The sector has been skittish this year following the collapse of Silicon Valley Bank and other lenders that led to a run on deposits at a number of regional lenders.

However, S&P said about 90% of the banks it rates have stable outlooks and just 10% have negative ones. None have positive outlooks.

The widespread stable outlooks shows that stability in the U.S. banking sector has improved significantly in recent months.

S&P is expecting FDIC-backed banks in aggregate to earn a relatively healthy ROE of about 11% in 2023.

KeyCorp. and Comerica both fell more than 3% on the news. Of the two, KeyCorp. has more outstanding debt and its 10-year bonds widened by about 5 to 10 basis points, according to data solutions provider BondCliq Media Services.

As the following chart shows, the bonds have seen better selling on Wednesday with buyers emerging around midmorning.

KeyBank net customer flow (intraday). Source: BondCliQ Media Services

The next chart shows customer flow over the last 10 days.

Most active KeyBank issues with net customer flow (last 10 days). Source: BondCliQ Media Services

The next chart shows the outstanding debt of the downgraded banks, with KeyCorp. clearly the leader with almost $16 billion of bonds.

Outstanding S&P downgraded banks debt USD by maturity bucket. Source: BondCliQ Media Services

Don’t miss: Capital One confirms roughly $900 million sale of office loans as property sector wobbles

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August 22, 2023

J&J Investors Must Decide If They Want Kenvue Stock

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This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

https://www.barrons.com/articles/kenvue-jnj-stock-price-exchange-offer-e85c3c90

Updated Aug. 15, 2023 10:25 am ET / Original Aug. 14, 2023 2:27 pm ET

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August 15, 2023

Charles Schwab’s stock on track for biggest one-day gain since March of 2020 after earnings beat

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Charles Schwab Corp.’s stock soared 12% Tuesday to put it on track for its biggest one-day increase since March of 2020, after the discount brokerage’s second-quarter earnings fell from a year ago but still topped consensus estimates.

Chief Executive Walt Bettinger acknowledged a “somewhat unsettled backdrop,” but said Schwab gathered $52 billion in core net new assets in the quarter, bringing the year-to-date total to more than $180 billion.

“While we observed signs of typical tax seasonality, as well as softer investor sentiment at the beginning of the quarter, we still attracted nearly 1 million new brokerage accounts and finished the period serving $8.02 trillion in total client assets across 34 million accounts,” he said in a statement.

The company
SCHW,
+12.57%
posted net income of $1.294 billion, or 64 cents a share, for the quarter, down from $1.793 billion, or 87 cents a share, in the year-earlier period. Adjusted per-share earnings came to 75 cents, ahead of the 71-cent FactSet consensus.

Revenue fell 9% to $4.656 billion, ahead of the $4.610 billion FactSet consensus.

See now: Morgan Stanley’s profit drops but beats expectations as stock rises

Bank deposits fell to $304.4 billion from $442.0 billion a year ago. The company’s clients have been engaged in a practice called “sorting,” where they are moving cash out of sweep accounts and into higher-paying products. When that process exceeds cash on hand, the company has to borrow from other funding sources that can be more expensive.

Still, Chief Financial Officer Peter Crawford said the daily outflows that have hurt the company over the last year as clients react to higher interest rates by seeking out better-paying options, began to slow.

“While anticipated client cash realignment, along with net equity buying during June, pushed cash levels lower, we observed a continued and substantial deceleration in the daily pace of cash outflows versus prior months,” he said.

Also read: Bank of America’s stock rises after second-quarter earnings and revenue beat expectations

“The continuation of this trend through the end of the quarter further strengthens our conviction that this realignment activity will inflect before the end of 2023, unlocking growth in client cash held on the balance sheet.”

On a call with analysts, Crawford said the company has not had to make any short-term borrowings from either CDs or Federal Home Loan Bank loans since late May and can now cover cash needs with organic sources.

“And as client cash realignment continues to slow and eventually reverses, we’d expect our supplemental funding balances to continue to decline over the next 18 months and be mostly paid off by the end of 2024,” he said, according to a FactSet transcript. “And this means that they should not really be a factor in our earnings picture in 2025 and beyond.”

Elsewhere, the company’s net interest income fell 10% to $2.3 billion as net interest margins fell 32 basis points from the first quarter to 1.87%.

Net interest revenue rose to $4.1 billion from $2.7 billion a year ago, while interest expenses jumped to $1.8 billion from $166 million.

The company also made progress with the conversion of client accounts from TD Ameritrade into Schwab accounts, with about 30% of accounts converted so far, said Bettinger. That comes after a major effort over the Memorial Day holiday weekend.

Schwab expects to move almost all of the rest over by year-end and to transition the final group in the first half of 2024, he said.

The stock has fallen 30% in the year to date, while the S&P 500
SPX,
+0.71%
has gained 17.8%.

Read now: JPMorgan Chase, Wells Fargo, Citi beat earnings targets but uncertainty clouds the economic outlook

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July 18, 2023

Bank of America, Morgan Stanley, Lockheed, Masimo, Novartis, and More Stock Market Movers

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Updated July 18, 2023 5:41 am ET / Original July 18, 2023 4:48 am ET

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July 18, 2023

The Charles Schwab Co. (NYSE:SCHW) Shares Sold by Valley National Advisers Inc.

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Valley National Advisers Inc. trimmed its position in The Charles Schwab Co. (NYSE:SCHW – Free Report) by 2.5% during the first quarter, according to its most recent filing with the Securities and Exchange Commission. The institutional investor owned 81,866 shares of the financial services provider’s stock after selling 2,112 shares during the quarter. Valley National Advisers Inc.’s holdings in Charles Schwab were worth $4,349,000 at the end of the most recent reporting period.

A number of other hedge funds and other institutional investors have also modified their holdings of the company. Phocas Financial Corp. purchased a new position in shares of Charles Schwab in the 4th quarter valued at $25,000. Beacon Capital Management LLC purchased a new position in shares of Charles Schwab in the 1st quarter valued at $25,000. Carolina Wealth Advisors LLC grew its position in shares of Charles Schwab by 54.8% in the 1st quarter. Carolina Wealth Advisors LLC now owns 565 shares of the financial services provider’s stock valued at $30,000 after buying an additional 200 shares during the last quarter. Householder Group Estate & Retirement Specialist LLC purchased a new position in shares of Charles Schwab in the 1st quarter valued at $30,000. Finally, Rocky Mountain Advisers LLC grew its position in shares of Charles Schwab by 704.2% in the 1st quarter. Rocky Mountain Advisers LLC now owns 571 shares of the financial services provider’s stock valued at $30,000 after buying an additional 500 shares during the last quarter. 82.77% of the stock is currently owned by institutional investors and hedge funds.

Charles Schwab Stock Up 1.8 %

Shares of NYSE SCHW opened at $57.83 on Tuesday. The company has a quick ratio of 0.39, a current ratio of 0.39 and a debt-to-equity ratio of 0.74. The Charles Schwab Co. has a 52 week low of $45.00 and a 52 week high of $86.63. The firm has a 50-day moving average price of $53.20 and a 200 day moving average price of $63.58. The stock has a market capitalization of $102.31 billion, a price-to-earnings ratio of 15.80, a price-to-earnings-growth ratio of 3.29 and a beta of 0.88.

Charles Schwab (NYSE:SCHW – Get Free Report) last announced its quarterly earnings data on Monday, April 17th. The financial services provider reported $0.93 EPS for the quarter, beating the consensus estimate of $0.90 by $0.03. Charles Schwab had a net margin of 34.82% and a return on equity of 27.83%. The firm had revenue of $5.12 billion during the quarter, compared to analysts’ expectations of $5.13 billion. During the same quarter last year, the business earned $0.77 earnings per share. The business’s revenue for the quarter was up 9.5% compared to the same quarter last year. Equities research analysts anticipate that The Charles Schwab Co. will post 3.22 EPS for the current fiscal year.

Charles Schwab Announces Dividend

The firm also recently announced a quarterly dividend, which was paid on Friday, May 26th. Shareholders of record on Friday, May 12th were given a dividend of $0.25 per share. This represents a $1.00 dividend on an annualized basis and a yield of 1.73%. The ex-dividend date of this dividend was Thursday, May 11th. Charles Schwab’s payout ratio is currently 27.32%.

Analyst Upgrades and Downgrades

Several brokerages have issued reports on SCHW. Jefferies Financial Group raised their price objective on shares of Charles Schwab from $64.00 to $66.00 in a research report on Monday. Piper Sandler lowered their price objective on shares of Charles Schwab from $75.00 to $69.00 in a research report on Wednesday, July 5th. Deutsche Bank Aktiengesellschaft lowered their price objective on shares of Charles Schwab from $75.00 to $72.00 in a research report on Tuesday, April 18th. Wolfe Research lowered their price objective on shares of Charles Schwab from $62.00 to $60.00 in a research report on Monday, June 26th. Finally, Barclays lowered their price objective on shares of Charles Schwab from $61.00 to $56.00 and set an “equal weight” rating on the stock in a research report on Friday, April 14th. Two investment analysts have rated the stock with a sell rating, three have assigned a hold rating and thirteen have given a buy rating to the company. According to MarketBeat.com, Charles Schwab currently has an average rating of “Moderate Buy” and a consensus target price of $66.83.

Insiders Place Their Bets

In other Charles Schwab news, Chairman Charles R. Schwab sold 77,640 shares of Charles Schwab stock in a transaction dated Monday, May 22nd. The shares were sold at an average price of $51.76, for a total transaction of $4,018,646.40. Following the completion of the transaction, the chairman now owns 59,771,278 shares in the company, valued at $3,093,761,349.28. The sale was disclosed in a document filed with the SEC, which is accessible through this hyperlink. 6.60% of the stock is currently owned by company insiders.

Charles Schwab Company Profile

(Free Report)

The Charles Schwab Corporation, together with its subsidiaries, operates as a savings and loan holding company that provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The company operates in two segments, Investor Services and Advisor Services.

Worried that stocks are too expensive? This value approach can highlight bargains.

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At a time when many investors seem euphoric, others are warning that stock valuations have once again turned frothy. It may pay to take a look back at valuation and performance and consider your own risk tolerance.

A value-based approach that offers lower volatility and good long-term returns can be expected to be less flashy than one focused on the hottest technology stocks. But depending on how much it bothers you when the stock market gyrates, it may be a better way for you to invest. Lower volatility might help you to avoid the type of emotional reaction that can lead to selling into a declining market or attempting to time the market, both of which tend to be losing strategies.

Aaron Dunn is a co-head of the value equity team at Eaton Vance, which is based in Boston and is a unit of Morgan Stanley. During an interview, he explained how he and Brad Galko, who co-heads the team, select stocks for the Eaton Vance Focused Value Opportunities Fund. The fund’s performance benchmark is the Russell 1000 Value Index
RLV,
+1.08%.

First, let’s take a broad look at how aggregate forward price-to-earnings ratios have moved for exchange-traded funds tracking several broad indexes over the past 10 years:

FactSet

The valuations are lower than their 2020 peaks. But for all but one, the valuations still appear to be high when compared with their 10-year averages:

ETF	Ticker	Current forward P/E	10-year average forward P/E	Current valuation to 10-year average
SPDR S&P 500 ETF Trust	SPY, +0.64%	19.06	15.93	120%
iShares Russell 1000 ETF	IWB, +0.80%	18.94	16.02	118%
iShares Russell 1000 Value ETF	IWD, +1.07%	14.33	13.94	103%
iShares Russell 1000 Growth ETF	IWF, +0.50%	26.63	19.00	140%
Source: FactSet

All of the listed ETFs listed here are trading well above their 10-year average P/E valuations except the iShares Russell 1000 Value ETF, which is only slightly higher. These numbers back the notion that the broad market is expensive and that a value approach may be more reasonable. It is also worth keeping in mind that during 2022, when the SPDR S&P 500 ETF Trust
SPY,
+0.64%
declined 18.2% and the iShares Russell 1000 ETF
IWB,
+0.80%
fell 19.2%, the iShares Russell 1000 Value ETF
IWD,
+1.07%
pulled back 7.7% and the Eaton Vance Focused Value Opportunity Fund’s Class I shares were down only 3.3%, all with dividends reinvested.

If we look at 10-year total returns, the nonvalue indexes, so heavily weighted to the largest technology-oriented companies, have been excellent performers for investors who could remain committed through thick and thin:

Fund	Ticker	3-year average annual return	5-year average annual return	10-year average annual return
SPDR S&P 500 ETF Trust	SPY, +0.64%	13.2%	11.4%	12.3%
iShares Russell 1000 ETF	IWB, +0.80%	12.5%	11.0%	12.1%
iShares Russell 1000 Growth ETF	IWF, +0.50%	11.2%	14.0%	15.0%
iShares Russell 1000 Value ETF	IWD, +1.07%	13.7%	7.3%	8.7%
Eaton Vance Value Opportunities Fund – Class I	EIFVX, +0.92%	14.8%	8.7%	9.7%
Source: FactSet

For five and 10 years, the growth-oriented approaches have shined. But for three years, which includes the 2022 disruption, the Eaton Vance Value Opportunities Fund has fared best, even outperforming its benchmark.

A selective approach to value

The Eaton Vance Focused Value Opportunity Fund’s Class I
EIFVX,
+0.92%
shares are rated four stars (out of five) within Morningstar’s Large Value fund category. The fund’s Class A
EAFVX,
+0.93%
shares are rated three stars. The difference is that the Class I shares, which are typically distributed through investment advisers, have annual expenses of 0.74% of assets under management, while the Class A shares have an expense ratio of 0.99%. You can purchase Class I shares directly through brokerage platforms for a $50 fee.

Dunn said that when selecting stocks for the fund, he and Galko take a bottom-up approach to identify quality companies. The want to see high returns on invested capital (ROIC) over the long term, as well as a “good competitive position” for a company and a strong management team.

They also prefer companies with low debt. “We do not want to buy overlevered companies and be in a situation where we are diluting through equity raises and putting capital at risk,” he said.

Dunn added that he and Galko look closely at free cash flow generation. A company’s free cash flow is its remaining cash flow after capital expenditures. This is money that can be used to fund expansion, acquisitions, dividend increases or share buybacks, or for other corporate purposes.

“Philosophically, what this results in is that we hold up well in markets such as last year’s. And we find upside in stocks trading below intrinsic value,” he said.

“We focus on finding ideas where there is a good skew for upside relative to downside,” he added.

According to Morningstar, the fund’s active share when compared with IWD is high, at 91.45%. Active share is a measure of how much an actively managed fund differs in investment exposure from its benchmark index. If you are paying more for active management than you would to invest in an index fund, active share is something to consider. If it is low, you might be overpaying for a “closet indexer.” You can read about how Morningstar assesses active shares here.

The fund is concentrated, typically holding between 25 and 45 companies.

According to Morningstar’s most recent data, these were the fund’s top 10 holdings (out of 28 stocks) as of May 31:

Company	Ticker	% of Eaton Vance Focused Value Opportunity Fund	Forward P/E	2023 total return
Alphabet Inc. Class A	GOOGL, +0.59%	5.0%	19.6	32%
Micron Technology Inc.	MU, +1.79%	4.8%	N/A	25%
American International Group Inc.	AIG, +1.15%	4.3%	8.1	-7%
Reinsurance Group of America Inc.	RGA, -0.34%	4.2%	8.0	1%
Bristol Myers Squibb Co.	BMY, +0.50%	4.1%	7.7	-11%
Wells Fargo & Co.	WFC, +0.99%	4.0%	8.9	4%
ConocoPhillips	COP, +2.96%	4.0%	10.5	-10%
Constellation Brands Inc. Class A	STZ, +0.30%	3.9%	20.4	9%
NextEra Energy Inc.	NEE, +0.67%	3.8%	21.9	-13%
Charles Schwab Corp.	SCHW, -0.43%	3.8%	16.0	-30%
Source: FactSet

Click the tickers for more about each company, fund or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

There is no forward price-to-earnings ratio for Micron Technology Inc.
MU,
+1.79%,
because the company’s combined EPS for the next 12 months are expected to be negative.

Micron is a company in transition, caught up in diplomatic conflict between the U.S. and China, whose government directed some manufacturers in May to stop purchasing memory chips made by the company. Then again, in June, Micron highlighted its “commitment to China” when announcing a new investment in its plant in Xi’an.

Read: Micron recovery debated by analysts as bottom is called in memory-chip market

Dunn said downside for Micron’s stock was “mitigated” because of the company’s relatively low debt. He also said that as companies continue to adopt more cloud services and deploy artificial-intelligence technology, demand for memory chips will increase.

While there is no current forward P/E for Micron, the stock always trades at low valuations relative to most other large tech companies. Dunn touted Micron’s strong cash flow and said the stock was “underappreciated” and remained “an interesting play on cloud and AI.”

While it is not among the top 10 holdings listed above, Dunn highlighted Dollar Tree Inc.
DLTR,
+1.80%
as an example of the type of value stock he favors. The company “was not well run” following its acquisition of Family Dollar in 2015. But he has been impressed with its more recent turnaround efforts, including improvements in how products are shipped to stores, better efficiency and “a lot of work going on with culture, how they operate, how they treat employees [and] adding some shelf space to move more product.”

It is interesting to see NextEra Energy Inc.
NEE,
+0.67%
among the fund’s largest holdings. This has been quite a strong grower over the past 10 years, with a total return of 346% as the owner of Florida Power & Light has grown along with its customer base and has become a leader in the build-out of solar-power generation.

Dunn said the company is “still growing in the mid-single digits. For a utility company, that is a strong profile.”

When discussing Alphabet Inc.
GOOGL,
+0.59%,
the fund’s largest holding as of May 31, Dunn said that “it is really an advertising business with other businesses around it” and that its P/E valuation was “not extremely taxing.” He said Alphabet had been “less aggressive with cost cutting” than other technology giants and added that the company’s “targeted search” through Google and other properties, such as YouTube, “probably provides a better return on investment than broadcast advertising, and that really is the key.”

Don’t miss: This stock investing strategy has blown away the S&P 500. Here’s a way to refine it for quality.

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July 11, 2023

Fed stress tests see large banks able to handle recession and slide in commercial real estate prices

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The U.S. Federal Reserve said Wednesday that all 23 banks in this year’s stress tests withstood a hypothetical “severe” global recession and losses of up to $541 billion as well as a 40% decline in commercial real estate prices.

The banks in the 2023 stress tests hold about 20% of the office and downtown commercial real estate loans held by banks and should be able to handle office space weakness that has loomed amid slack demand for space in the wake of the COVID-19 pandemic.

“The projected decline in commercial real estate prices, combined with
the substantial increase in office vacancies, contributes to projected loss rates on office properties that are roughly triple the levels reached during the 2008 financial crisis,” the Fed said in a prepared statement.

Also read: FDIC studying plan to include smaller U.S. banks in Basel III capital requirements after failures in early 2023

Fed vice chair of supervision Michael S. Barr said the exams confirm that the U.S. banking system remains resilient, even in the wake of the failure of Silicon Valley Bank, Signature Bank and First Republic Bank earlier this year.

Barr also alluded to comments he made last week when he said the Fed should consider a wider range of risks that could derail banks in a process he described as reverse stress tests.

“We should remain humble about how risks can arise and continue our
work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses,” Barr said in a prepared statement.

The bank stress tests are closely watched because they help determine what capital banks have left over for stock buybacks and dividends. However, expectations are not particularly high at the current time for any huge payouts to investors given talk by regulators about high capital requirements tied to Basel III international banking laws, as well as a challenging economic environment with interest rates on the rise in an attempt to cool economic activity and tame inflation.

Senior Fed officials said banks will be clear to provide updates on their stock buybacks and dividends after the market close on Friday.

For the first time, the Fed conducted an “exploratory market shock” on the trading books of the U.S.’s eight largest banks including greater inflationary pressures and rising interest rates.

The results showed that the largest banks’ trading books were resilient to the rising rate environment tested. That group included Bank of America Corp., the Bank of New York Mellon, Citigroup Inc., the Goldman Sachs Group Inc., JPMorgan Chase & Co. , Morgan Stanley , State Street Corp, and Wells Fargo & Co.

Senior federal officials said they’re studying a wider application of the exploratory market shock to other banks.

In last year’s tests, the Fed did not place an emphasis on a rapid rise in interest rates partly because expectations were high for a recession with lower interest rates in 2023. Instead, interest rates rose. That market dynamic was a factor in the collapse of Silicon Valley Bank, which sold securities with lower interest rates at a loss to cover an increase in withdrawals, only to spark a run on the bank.

All told, the Fed said the 23 banks in the stress test managed to maintain their capital requirements even with a projected $541 billion in losses. (See breakdown below).

U.S. Federal Reserve chart

Under the most severe stress, the aggregate common equity risk-based capital ratio would decline by 2.3% to a minimum of 10.1%.

Other facets of the hypothetical recession included a “substantial” increase in office vacancies, a 38% reduction in house prices and a 6.4% increase in U.S. unemployment to a high of 10%. The drop in house prices in this year’s stress tests is worse than the decline in the Global Financial Crisis in 2008.

“The results looked pretty good,” said Maclyn Clouse, a professor of finance at the University of Denver’s Daniels College of Business. “The banks were in pretty good shape from a capital standpoint and they’d be able to withstand some shock. It’s good news.”

Barr’s remark on Fed officials being “humble” reflects the fact that regulators largely missed the Global Financial Crisis as well as the sudden demise of Silicon Valley Bank in March.

“They need to be humble,” Clouse said. “We need to be a little more humble about the results and a little more alert about new challenges that normally haven’t been looked at with stress tests.”

This year, the banks that took part in the stress tests including Bank of America Corp.
BAC,
-0.60%,
Bank of New York Mellon Corp.
BK,
-0.64%,
Capitol One Financial Corp.
COF,
+0.52%,
Charles Schwab Corp.
SCHW,
+1.01%,
Citigroup
C,
-0.37%,
Citizens Financial Group Inc.
CFG,
-1.61%
and Goldman Sachs Group Inc.
GS,
+0.07%.

Other exams took place at J.P. Morgan Chase & Co.
JPM,
-0.44%,
M&T Bank Corp.
MTB,
-0.18%,
Morgan Stanley
MS,
-0.52%,
Northern Trust Corp.
NTRS,
-0.46%,
PNC Financial Services Group Inc.
PNC,
-0.36%,
State Street Corp.
STT,
-0.62%,
Truist Financial Corp.
TFC,
-0.07%,
U.S. Bancorp
USB,
-0.71%
and Wells Fargo & Co.
WFC,
-0.71%.

In 2022, the Fed said banks could withstand 10% unemployment and a 55% drop in stock prices as part of the year-ago stress test.

KBW analyst David Konrad said in a June 22 research note he expected no “huge surprises” in addition to capital uncertainty around dividends and buybacks already expected by Wall Street.

Providing guidance on how the Fed will study bank strength, Fed chair of supervision Michael Barr said last week that the Fed needs to consider “reverse stress tests” to look at “different ways an institution can die” instead of simply submitting banks to a specific list of hypothetical hardships.

“We have to work harder at looking at patterns we haven’t seen before,” Barr said at an appearance on June 20.

Also Read: Fed official eyes ‘reverse stress tests’ for banks as results awaited after 2023 bank failures

Also read: FDIC studying plan to include smaller U.S. banks in Basel III capital requirements after failures in early 2023

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June 28, 2023

U.S. bank stocks end with solid gains as 11 banks pledge $30 billon to First Republic

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U.S. bank stocks ended regular trading with solid gains on Thursday, as banks announced a $30 billion deposit capital infusion for First Republic Bank and as Treasury Secretary Janet Yellen cited the strength of the financial system.

The 11 banks confirmed a report from the Wall Street Journal and others about providing financial support for First Republic Bank FRC.

U.S….

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March 16, 2023

SCHW Stock Price | Charles Schwab Corp. Stock Quote (U.S.: NYSE) | MarketWatch

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The Charles Schwab Corp. is a savings and loan holding company, which engages in the provision of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. It operates through the Investor Services and Advisor Services segments. The Investor Services segment includes retail brokerage and banking services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, retirement business, and support services, as well as retirement business services to independent registered investment advisors, independent retirement advisors, and record keepers. The company was founded by Charles R. Schwab in 1986 and is headquartered in Austin, TX.

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October 17, 2022

Tag: SCHW

Charles Schwab stock drops after revenue falls a bit shy of expectations, amid trading weakness

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Charles Schwab Company Profile

See Also

Worried that stocks are too expensive? This value approach can highlight bargains.

A selective approach to value

Fed stress tests see large banks able to handle recession and slide in commercial real estate prices

U.S. bank stocks end with solid gains as 11 banks pledge $30 billon to First Republic