No. of Recommendations: 7
For what it's worth, a couple of cautionary notes from Morningstar and Value Line re: SCHW.
Morningstar has lowered its far value estimate from $87 to $70 a share. Given the present share price they see the stock as likely undervalued.
Value Line has downgraded SCHW's Safety Ranking to 4 (below average. 1 being highest and 5 lowest).
Snip from VL's commentary:
Shares of Charles Schwab have come
under selling pressure since the
recent banking crisis emerged. The
company has recently reclassified certain
long-term bonds that it had on its balance
sheet. By doing so, it has managed to dis-
guise potential losses that would have to
be taken if the securities were priced at
their market value. Also profits earned
from clients cash accounts have spiked
75%. Much of this is due to the Fed's
policy of raising interest rates to slow in-
flationary pressures. Schwab has hiked
the rates it pays on cash at a much lower
rate than the rise the Fed Funds rare.
This has been a boon for the bottom line,
but Wall Street has become concerned be-
cause this is how banks, rather than
brokers, make their income.
Have the concerns have been over-
blown? Possibly.
Snip:
Conservative investors may want to
avoid this timely stock. Year-to-date,
the equity has fallen 35%. For contrarian
investors, this could represent a decent
entry point. It should be noted, however,
that we have lowered the equity's Safety
rank to a 4 (Below Average).
No. of Recommendations: 6
Cheap on every metric I track and close to it's historical percentage drops in the past.
Once I determined the risk is just to earnings (temporarily) and not existential, I started a 2% position in the 48's.
Will add more on drops if nothing else changes.
