Should You Consider Investing in Charles Schwab Corporation (SCHW)?

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RiverPark Funds, an investment management firm, published its “RiverPark Large Growth Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. The RiverPark Large Growth Fund (the “Fund”) returned 2.5% for the first quarter, while its benchmarks, the S&P 500 Total Return Index (“S&P”) advanced 6.2%, the Russell 1000 Growth Total Return Index (“RLG”) returned 0.9%. In contrast, the Russell 1000 Value Total Return Index returned 11.2%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

RiverPark Large Growth Fund, in their Q1 2021 investor letter, mentioned The Charles Schwab Corporation (NYSE: SCHW) and shared their insights on the company. The Charles Schwab Corporation is a Westlake, Texas-based financial services company that currently has a $120.9 billion market capitalization. Since the beginning of the year, SCHW delivered a 20.80% return, extending its 12-month gains to 78.27%. As of April 19, 2021, the stock closed at $65.88 per share.

Here is what RiverPark Large Growth Fund has to say about The Charles Schwab Corporation in their Q1 2021 investor letter:

“We also re-initiated a position in Charles Schwab, a leading investment services firm. Following its acquisition of TD Ameritrade, the company now has more than $6.7 trillion in client assets, up from $2.5 trillion just five years ago. Against this 170% increase in client assets, revenue has increased just 83%, as trading fees and net interest income have lagged. The company now has several revenue initiatives to grow its asset-based fees to make revenue more recurring and more aligned with asset growth over the long-term. Over the near-term, Schwab’s 2020 $22 billion acquisition of TD Ameritrade should boost earnings through 2023 from both revenue benefits and significant cost synergies. Additionally, with net interest revenue at more than 50% of total revenue and interest rates at all-time lows, we believe interest rate increases over time bode well for future earnings. We project a minimum 7% annual asset growth, which, combined with revenue initiatives, acquisition synergies, and the company’s disciplined expense control, should generate double-digit earnings growth over the long term. These rates of growth could be higher if the Fed increases interest rates.”

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Our calculations show that The Charles Schwab Corporation (NYSE: SCHW) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, The Charles Schwab Corporation was in 61 hedge fund portfolios, compared to 53 funds in the third quarter. SCHW delivered an 8.01% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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