Financial services giant Charles Schwab experienced a rough 2023 as its stock price fell more than 30% in the first quarter due to deposit outflows during a banking crisis. The company was forced to seek out more expensive sources of funding, leading to several analysts’ downgrades. However, this provided a buying opportunity for fund managers like Ruane, Cunniff, and Goldfarb, who saw potential in the long term value of the stock.
Despite challenges, Schwab’s stock price did rebound slightly as deposits started to come back in the fourth quarter. The integration of TD Ameritrade into the Schwab platform led to higher expenses, but cost savings of $500 million are expected in 2024. Portfolio managers at Sequoia Fund and Giverny Capital saw the stock’s discounted price as an opportunity to increase their positions, believing in Schwab’s long-term earnings power.
Ariel Investments also remains bullish on Schwab, citing its scale and customer-centric focus as factors that enhance its industry-leading cost advantage. However, not all investors shared the same optimism, with Right Tail Capital selling shares in Schwab last year. While the stock has rebounded to $71 per share, analysts view it as a consensus buy with a price target of around $75.
Schwab’s challenges have not deterred investors like Sequoia Fund and Giverny Capital, who continue to see value in the stock’s long-term potential. Despite uncertainties surrounding rising interest rates and liquidity challenges, these fund managers believe in Schwab’s ability to power through and generate attractive returns for shareholders over the coming years.
While some investors opted to sell their Schwab shares, others seized the opportunity to buy more when the stock dipped below $50 per share. With a consensus buy rating from analysts and potential for long-term growth, Schwab’s stock price may not have fully recovered to pre-crisis levels, but many investors see value in holding onto their positions for the future.
