A Charles Schwab Corp (SCHW) Insider Bought $250,000 Worth of Stock

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TD Ameritrade matches Charles Schwab Corp (NYSE:SCHW), however, in seeing only modest improvements in both revenue and net income in its most recent quarterly report compared to the same period in the previous fiscal year. eTrade has been even worse off, with its recent reports showing a decline in business. That company also carries a good deal of leverage, and partly as a result of that it is highly exposed to movements in the overall market with a beta of 2.4.

Other investment brokerages aimed at smaller customer bases are LPL Financial Holdings Inc (NASDAQ:LPLA) and MarketAxess Holdings Inc. (NASDQ:MKTX). Conditions have been considerably better at these two companies. LPL, which focuses on providing a platform for financial advisors, experienced a significant rise in income in its last quarterly report compared to the first quarter of 2012, and even though this was mostly from higher margins its revenues were still up 8%. Its trailing earnings multiple is 25. MarketAxess is also fairly expensive in terms of its trailing results, about in line with Charles Schwab’s valuation, but that company (which provides a brokerage platform for institutional investors trading fixed income investments) recorded close to a double-digit growth rate in sales with slightly wider net margins as well.

We wouldn’t recommend imitating this insider purchase at Charles Schwab, or buying the other individual investment brokerages, as the valuations are quite high considering recent performance. LPL and MarketAxess are also expensive in terms of their trailing P/Es, even in terms of their recent growth rates, and so it would probably best to avoid them as well at least for now.

Disclosure: I own no shares of any stocks mentioned in this article.

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