The Charles Schwab Corporation (SCHW) Outperformed for the Second Quarter as Earnings Outlook Improves

Baron Funds, an investment management company, released its “Baron Asset Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. After a strong start to 2025, U.S. equities dropped sharply in late February, with most broad market indexes finishing the quarter down mid- to high single digits. Initially, investors were optimistic about the economy during President Trump’s second term. However, market sentiment shifted due to Trump’s plans for sweeping tariffs on key U.S. trade partners. Additionally, investors tempered their enthusiasm for AI beneficiaries, leading to a sell-off in the Magnificent Seven and other companies within the AI ecosystem. Against this backdrop, Baron Asset Fund had a robust first quarter, returning -2.89% (Institutional Shares) compared to the Russell Midcap Growth Index’s -7.12% return. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Asset Fund highlighted stocks such as Charles Schwab Corporation (NYSE:SCHW). The Charles Schwab Corporation (NYSE:SCHW) is a savings and loan holding company that offers wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The one-month return of The Charles Schwab Corporation (NYSE:SCHW) was -0.21%, and its shares gained 20.82% of their value over the last 52 weeks. On June 12, 2025, The Charles Schwab Corporation (NYSE:SCHW) stock closed at $88.50 per share, with a market capitalization of $160.802 billion.

Baron Asset Fund stated the following regarding The Charles Schwab Corporation (NYSE:SCHW) in its Q1 2025 investor letter:

“Strength in Financials came from specialty insurer Arch Capital Group Ltd. and brokerage firm The Charles Schwab Corporation (NYSE:SCHW). Schwab’s shares outperformed for a second consecutive quarter, helped by an improved earnings outlook. After reaching trough levels last year, Schwab’s cash balances continued to trend higher during the quarter. Investors believe Schwab will use these balances to pay down higher cost borrowings, which should drive net interest income and earnings higher.”

Jim Cramer Applauds Charles Schwab (SCHW): “Much Better Than Expected Earnings”

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The Charles Schwab Corporation (NYSE:SCHW) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 102 hedge fund portfolios held The Charles Schwab Corporation (NYSE:SCHW) at the end of the first quarter, which was 91 in the previous quarter. In the first quarter, The Charles Schwab Corporation’s (NYSE:SCHW) total revenue increased 18% year-over-year to $5.6 billion. While we acknowledge the potential of The Charles Schwab Corporation (NYSE:SCHW) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered The Charles Schwab Corporation (NYSE:SCHW) and shared the list of best wide moat stocks to buy. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. The Charles Schwab Corporation (NYSE:SCHW) contributed to RiverPark Large Growth Fund’s performance in the first quarter. While we acknowledge the potential of SCHW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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