|Instrument:SCHWAB (CHARLES) CORP|
Headquartered in Westlake, Texas, US, The Charles Schwab Corporation is a global financial services company that, through its subsidiaries, offers securities brokerage, wealth management, custody, banking, and financial advisory services as well as electronic trading platforms to both retail and institutional clients. With over $7.5 trillion in client assets, Charles Schwab is the 3rd largest asset manager in the world, behind only Vanguard and BlackRock as of October 2021. The company was founded in 1971 by Charles R. Schwab, and it opened its first operating office in San Francisco, California.
The defining moment for Charles Schwab came in May 1975 when the US Congress deregulated the stock brokerage industry, allowing for a negotiated commission rate. This opened up the opportunity for discount brokers to take orders to buy and sell stocks without offering investment advice or research services. Charles Schwab set up a stock brokerage firm that quickly grew to become the leading discount broker in the US. Despite the emergence of numerous discount brokers, Charles Schwab managed to pull way ahead of the pack by introducing innovative products and services, such as enabling round-the-clock order placement and using advanced computer systems to support high-volume trading. The company continued its aggressive expansion, but it soon became a victim of its own success. Its high growth meant that it required external backing, and Bank of America acquired the company in 1983. Founder Charles Schwab later bought the company back in 1987 and took it public the same year.
Since going public, Charles Schwab has maintained a solid track record of innovation as well as strategic M&A plays that extended its dominance throughout the wider financial industry. In the early 1990s, it had the most successful Mutual Fund Marketplace, and in the late 1990s, it became the biggest beneficiary when web trading exploded as a result of the internet becoming mainstream. In the 21st century, the company has remained committed to technological innovation as well as inorganic growth. In 2021, it acquired major competitor TD Ameritrade in a deal that cemented its dominance in the brokerage space.
Charles Schwab is listed on the NYSE, trading under the stock ticker SCHW. The stock is categorised in the Financial Services sector, under the Capital Markets industry.
SCHW Stock History
Charles Schwab has implemented 8 stock splits in its history, with the last one being a 3-for-2 split on May 31st, 2000. The turn of the millennium was very volatile for the Charles Schwab stock. From a peak of circa $43 in March 2000, the SCHW stock embarked on a downtrend that bottomed out at circa $7 by March 2003. The stock then got a reprieve and attempted to stage a recovery that peaked at around $25 in December 2007.
However, the effects of the 2008 Great Recession capped any further rally attempts. In early 2012, the stock then picked up momentum and staged a rally from circa $10 and it then managed to print a peak above $60 by mid-2018. The subsequent correction was then overextended as economies were shut down during the 2020 Great Lockdown as a result of the global coronavirus pandemic. The stock then tumbled to circa $30 by March 2020, but an impressive recovery followed that saw the stock reach its all-time highs (at the time of writing) at circa $78 in October 2021.
Charles Schwab is a willing dividend payer. The company typically adjusts its payouts according to its business performance, averaging a dividend yield of 1% in recent years.
How to Trade Charles Schwab
Here are some of the factors to consider when trading SCHW stock:
- Regulatory and Legislative Issues
Charles Schwab operates in an industry that has been subject to extensive regulatory scrutiny since the 2008 global financial crisis. The legal environment is also very dynamic, with emerging data protection and cybersecurity issues, biometric authentication, robo-advisors, blockchain technology, and public cloud outsourcing. Changes in the regulatory and legislative scene present a significant risk to the company and the SCHW stock.
The financial industry is highly competitive, especially for a company that is as fee reliant as Schwab. In the asset management segment, the company has to contend with players such as Goldman Sachs; while in the brokerage space, competition comes from players such as Interactive Brokers and Fidelity; while in the mutual funds’ space, Charles Schwab has to rival giant players such as BlackRock and Vanguard. In all its operating spaces, competition is based on factors such as pricing, range of products and services offering, perceived financial strength, customer service, and reputation.
- Economic Conditions and Monetary Policy
Financial stocks, such as SCHW, are very sensitive to prevailing economic conditions and the underlying monetary policy. An upbeat economy provides tailwinds for the stock, whereas a slowing economy provides headwinds. On the monetary front, a higher interest rate environment is favourable for the SCHW stock, whereas a lower interest rate environment usually weighs down on the stock.
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