We all like to hear the opinions of successful stock pickers and fund managers. After all, they are in the business of investing and they have access to more information that the average investor. So it makes sense to listen to them when they say we should buy these stocks and avoid those stocks.
Unfortunately, you cannot just blindly follow their picks. They are human and they make mistakes all of the time. You have to put your own research and analysis into any investment before you pour your hard-earned money into it.
This article appeared first on ModestMoney.com
In January, Time’s Money pulled together some successful fund managers to get their insights into what stocks you should buy. The group included the managers of Dodge & Cox Stock Fund (MUTF:DODGX), Parnassus Core Equity Fund – Investor Shares (MUTF:PRBLX), T. Rowe Price QM U.S. Small-Cap Growth Equity Fund (MUTF:PRDSX), and Tweedy, Browne Global Value Fund (MUTF:TBGVX). Below are a handful of their picks to buy and why I think you should or shouldn’t listen to them.
Should You Buy These Stocks?
Charles Schwab Corp (NYSE:SCHW)
The first pick is Charles Schwab Corp (NYSE:SCHW), a discount broker. Schwab has been on a tear lately, picking up new clients. In fact, last year they increased new accounts by 4%. The reason Schwab can pick up new clients is because of how they have been doing business.
– They pick up high net worth investors through their partnerships of custody with registered investment advisors (RIAs).
– They pick up retail investors through low cost investments and innovation.
The low cost and innovation are what is really driving the growth. Charles Schwab Corp (NYSE:SCHW) offers many no commission ETFs and recently announced they reduced stock commissions to $6.95 per trade. They also offer a completely free robo-advising service as well.
So how do they make money with such low fees? They reinvest bank deposits and they make some money on the price spread of their no fee ETFs. With interest rates low, they make a nice amount on the $186 billion they currently have. As interest rates rise, so will the interest income on this money. And you can bet that new investors will continue to flock to Charles Schwab Corp (NYSE:SCHW).
As a result, I agree with the experts that Schwab is a buy.
CVS Health Corp (NYSE:CVS)
CVS Health Corp (NYSE:CVS) is a retail pharmacy and has made news with it deciding to stop selling cigarettes and to take over the pharmacies in Target stores. Since 2015 the stock is down over 30% due to competition from other pharmacies and their lower prices.
The experts say that even with lower-priced competition, CVS’ customer retention rate is still at 96% and that the company is poised for more growth.
I disagree. I feel that lower-priced competition will continue to negatively affect CVS Health Corp (NYSE:CVS). I can use my personal experience on this one. I used to use CVS as my pharmacy but prices were higher every time I went to refill a prescription. I ended up switching to the grocery store. I now pay $9.99 for a prescription that was costing me $48 at CVS.
Even with the stock market rising, many people are still struggling financially. As more grocery stores offer incentives to bring your prescriptions and new online pharmacies emerge, CVS Health Corp (NYSE:CVS) is going to have to do something to be more competitive with their pricing.