The Charles Schwab Corporation (SCHW) Fell Out Of Favor With Hedge Funds

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of The Charles Schwab Corporation (NYSE:SCHW) based on that data.

Is The Charles Schwab Corporation (NYSE:SCHW) an attractive investment today? Money managers were getting less bullish. The number of bullish hedge fund positions dropped by 13 lately. The Charles Schwab Corporation (NYSE:SCHW) was in 59 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 76. Our calculations also showed that SCHW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 72 hedge funds in our database with SCHW holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a look at the recent hedge fund action encompassing The Charles Schwab Corporation (NYSE:SCHW).

Donald Yacktman of Yacktman Asset Management

Do Hedge Funds Think SCHW Is A Good Stock To Buy Now?

At Q3’s end, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SCHW over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Charles Schwab Corporation (NYSE:SCHW) was held by Egerton Capital Limited, which reported holding $1039 million worth of stock at the end of September. It was followed by Generation Investment Management with a $940.5 million position. Other investors bullish on the company included Route One Investment Company, Intermede Investment Partners, and Yacktman Asset Management. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to The Charles Schwab Corporation (NYSE:SCHW), around 12.96% of its 13F portfolio. Route One Investment Company is also relatively very bullish on the stock, designating 11.98 percent of its 13F equity portfolio to SCHW.

Since The Charles Schwab Corporation (NYSE:SCHW) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers that elected to cut their full holdings last quarter. It’s worth mentioning that Matthew Stadelman’s Diamond Hill Capital sold off the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $464.9 million in stock. James Parsons’s fund, Junto Capital Management, also dumped its stock, about $44 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 13 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to The Charles Schwab Corporation (NYSE:SCHW). These stocks are Sony Group Corp (NYSE:SONY), BHP Group (NYSE:BHP), HDFC Bank Limited (NYSE:HDB), American Express Company (NYSE:AXP), Bristol Myers Squibb Company (NYSE:BMY), Starbucks Corporation (NASDAQ:SBUX), and Raytheon Technologies Corp (NYSE:RTX). This group of stocks’ market caps are similar to SCHW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SONY 19 388862 -1
BHP 18 899835 0
HDB 40 1794819 1
AXP 57 29603207 5
BMY 74 4758551 1
SBUX 58 4807317 -5
RTX 48 2259405 -5
Average 44.9 6358857 -0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.9 hedge funds with bullish positions and the average amount invested in these stocks was $6359 million. That figure was $4579 million in SCHW’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. The Charles Schwab Corporation (NYSE:SCHW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SCHW is 51.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on SCHW, though not to the same extent, as the stock returned 6.5% since Q3 (through November 30th) and outperformed the market as well.

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