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Buy the Dip: Schwab $SCHW
I just initiated a massive position in $SCHW at $48, now second to only $SNOW in my portfolio after the stock dumped 20% today and 45%+ in the last week. Easy buy after the CFO came out today to say that the “business continues to perform exceptionally well” with access to “significant liquidity” and “more than 80% of total bank deposits falling within FDIC insurance limits.”
Oh, and they also got an upgrade from Citi to Buy.
Not to play devils advocate but what do you expect him to come out and say lol. Also a bank upgrading a bank is funny. I respect your decision and I do agree the drop is a little overreacting so I think you can be in it for a trade but I agree with what Morgan Stanley said this morning. MORGAN STANLEY: “We suggest selling any bounces on a government intervention to quell the immediate liquidity crisis at SVB and other institutions until we make new bear market lows, at a minimum.”
@christian7621 I appreciate the discourse but the investment thesis is simple - high quality business at a discount that doesn’t accurately reflect current operations. The CFO’s comments just confirm what I already know about $SCHW not being affected by $SIVB, with a cherry on top of nice rev growth this Q of 10% despite this macro craziness.
@wjared no I totally get and respect the investment thesis. Like you said does not reflect current operations and I think it’s overblown too definitely agree with you there. But at the same time given a whole bunch of macro stuff I do agree with what Morgan Stanley had to say. But can’t always live like a bear and can’t always live like a bull. It’s a very weird time and I don’t have an answer just my opinion. You know how much I respect you and love talking to you. One of my favorite people on here.
@christian7621 appreciate you!
@wjared I definitely think Charles Schwab is in a great place. I love how they’ve really pushed to come out and get ahead of this. Bank stocks are hard for me to own not my area of expertise at all. But again it truly does make sense very overblown especially for how much cash Charles Schwab does have. I know it’s gonna work out well for you
Additional context from founder Chuck Schwab himself: https://www.aboutschwab.com/perspective-on-recent-industry-events
So did SVB fail their recent stress test? Barely pass? Or the bank run was even too much for a well stress tested bank to handle
@rpinvestments good question. I’ll defer to someone more knowledgable about the SVB situation to answer it directly, but I will say SVB seems unique with their combination of clientele, deposits, investments, and business model in general. According to the memo from Schwab, SVB could have had between 2-20% of their deposits insured vs 80%+ at Schwab.
Definitely a call to action to improve transparency and potentially make requirements more stringent.
However, it appears to be a management decision to engage in risky activities so maybe this is an idiosyncratic event that falls on company management and shareholders.
@rpinvestments here’s some analysis from our boy Dave - https://twitter.com/davegirouard/status/1635305482406727680?s=46&t=2hT-ude3Uk77R784GHIIoQ
@wjared almost like a margin call. Being forced to sell anything early, even bonds, isn’t good.
I also thought the 20% drop over a couple of days was unwarranted. I haven't dug as deep into the long term business fundamentals though, so I went ahead and exited my trade when it popped this morning for a modest gain. Rooting for you and Charles Schwab though to recover to highs. As I look into it more I might re-enter for longer.
@nathanworden you can never go wrong with a quick flip! Appreciate it. Ironically I’m waiting for Schwab to settle my trade so it’ll show up on my profile 😂
@wjared haha c’mon Schwab! Looking forward to seeing the trade!
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