Should You Be Tempted To ‘Sell’ Charles Schwab Corp (SCHW) Stock

Anabatic Fund recently released its Q4 2020 Investor Letter, a copy of which you can download here. The fund posted a return of -11.7% in 2020 (net of fees) compared to the S&P 500 Index which returned 16.3% in the same period. You should check out Anabatic Fund’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the Q4 2020 Investor Letter, Anabatic Fund highlighted a few stocks and Schwab Charles Corp (NYSE:SCHW) is one of them. Schwab Charles Corp (NYSE:SCHW) is a financial services company. In the last three months, Schwab Charles Corp (NYSE:SCHW) stock gained 35.1% and on January 27th it had a closing price of $53.29. Here is what Anabatic Fund said:

“We sold our shares of Schwab (SCHW) in 2020 due to a combination of valuation and (over)optimism, the pending integration of the TD Ameritrade acquisition, cultural and leadership changes, and taxes. Schwab has the added challenge of fundamental headwinds. The company makes most of its money on the spread between interest paid on clients’ cash balances and the interest Schwab earns (mostly by holding Treasurys) on that cash. The current interest rate environment makes that proposition has hard as it’s ever been. It’s impossible to pinpoint the future course of interest rates, but current conditions are difficult to say the least. Something will have to change for Schwab to achieve its prior level of profitability.

Schwab does retain many attractive characteristics, and the company bears watching. Management has proven adept at managing its business to meet the environment even as commissions have dwindled to zero, interest rates have plummeted, index funds have grown, and retail trading has shifted. The integration of the TD Ameritrade acquisition will be a massive and complex undertaking, but the potential payoff is material. Like BLDR, it would not be hard to imagine owning shares of Schwab again at a favorable price.”

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In Q3 2020, the number of bullish hedge fund positions on Schwab Charles Corp (NYSE:SCHW) stock decreased by about 25% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in SCHW’s growth potential. Our calculations showed that Schwab Charles Corp (NYSE:SCHW) isn’t ranked among 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.