Charles Schwab (SCHW), A Notable Contributor to Ensemble Capital’s Performance

Ensemble Capital Management, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. In the letter, they discussed the whole year performance of the fund in 2020 and also gave insights on the investment decisions they’ve made last year. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Ensemble Capital Management, in their Q4 2020 Investor Letter said that they consider The Charles Schwab Corporation (NYSE: SCHW) as one of the notable contributors to their performance. The Charles Schwab Corporation is a banking, stock brokerage and wealth management  company that currently has a $96.8 billion market cap. For the past 3 months, SCHW delivered a 25.37% return and settled at $51.54 per share at the closing of January 29th.

Here is what Ensemble Capital Management has to say about The Charles Schwab Corporation in their investor letter:

“A notable contributor to our performance came from Charles Schwab & Co. While Schwab is a broker dealer, the most meaningful source of its current and future earnings power is the way it monetizes client relationships via sweeping client cash into Schwab Bank. Like all banks, this means Schwab’s earnings power is related to its net interest margin, which is positively impacted by higher interest rates and a steeper yield curve (longer term interest rates being higher than short term interest rates). In recent years, Schwab has grown its asset base dramatically both organically and via acquisitions, but low interest rates and a flat yield curve has minimized their earnings power. So as interest rates rose in the fourth quarter with the yield curve steepening, Schwab rallied 47%.”

Jonathan Weiss/

Last December 2020, we published an article telling that The Charles Schwab Corporation (NYSE: SCHW) was in 53 hedge fund portfolios. Its all time high statistics is 71. SCHW delivered a decent 18.73% return in the past 12 months.

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.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 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. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.