What Makes The Charles Schwab Corporation (SCHW) a Worthy Investment Bet?
Ruane, Cunniff & Goldfarb, an investment adviser managing Sequoia Fund, released its Q4 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund returned 13.31% compared to an 11.69% return for the S&P 500 Index. The fund generated a 27.83% return in 2023 compared to a 26.29% return for the index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Sequoia Fund featured stocks like The Charles Schwab Corporation (NYSE:SCHW) in the fourth quarter 2023 investor letter. Headquartered in Westlake, Texas, The Charles Schwab Corporation (NYSE:SCHW) is a savings and loan holding company. On March 19, 2024, The Charles Schwab Corporation (NYSE:SCHW) stock closed at $68.35 per share. One-month return of The Charles Schwab Corporation (NYSE:SCHW) was 6.58%, and its shares gained 21.49% of their value over the last 52 weeks. The Charles Schwab Corporation (NYSE:SCHW) has a market capitalization of $124.696 billion.
Sequoia Fund stated the following regarding The Charles Schwab Corporation (NYSE:SCHW) in its fourth quarter 2023 investor letter:
"By way of example, consider the following holdings: Rolls Royce, The Charles Schwab Corporation (NYSE:SCHW), Elevance Health, Credit Acceptance, Capital One Financial, Liberty Broadband, and Ashtead. Each of these companies trades for a low double-digit, or lower, multiple of our estimate of normalized earnings per share, yet each of them is capable of compounding earnings per share at a double-digit rate. At year-end 2023, these holdings accounted for almost a third of the Fund’s capital. Additions in 2023 included Liberty Broadband, Charles Schwab, Elevance, and Capital One Financial.
Charles Schwab is notable because the business and the stock both had a challenging year. The regional banking panic in the spring of 2023 created an opportunity for us to add to our position below $50 per share. Rising interest rates have impacted the business in ways both predictable and unpredictable, but the net result has been a crimping of earnings that will likely persist for another year or two. Critically, we do not believe any of these transitory dynamics pose, or ever posed, any existential risk to the business. Further, Schwab’s enviable, high-return franchise remains, in our view, entirely intact. If we are right on both these counts, we should generate an attractive return from the current stock price across a range of long-term interest rate scenarios.
Shares in Charles Schwab returned -16% last year, making it the Fund’s worst-performing stock. By holding steady in the down market of 2022, it was one of the Fund’s best-performing stocks that year. This reversal in stock performance reflects a realization that rising interest rates are not an unalloyed good for Schwab in the short run…” (Click here to read the full text)
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The Charles Schwab Corporation (NYSE:SCHW) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, The Charles Schwab Corporation (NYSE:SCHW) was held by 81 hedge fund portfolios, up from 77 in the previous quarter, according to our database.
We discussed The Charles Schwab Corporation (NYSE:SCHW) in another article and shared the list of best stocks under $100 to buy. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
