Is This Discount Broker A Value Play At Current Levels?
As a global tightening of monetary policy continues to unfold and interest rates rise, many analysts and investors have begun pouring money into sectors such as financials which should benefit from rising interest rates and away from companies operating in interest rate sensitive industries such as utilities or telecommunications.
One company which is in a kind of offshoot of the financial sector which should also benefit from an improving global economy and piqued interest in equity markets is Charles Schwab Corp. (NASDAQ:SCHW).
Charles Schwab is largely considered to be one of the best discount brokers which is publicly traded for investors to gain exposure to, and is a company which is likely to ride the trend of rising interest rates given the fact that approximately two-fifths of the company’s earnings originate from the company’s net interest margin, or the money the company makes by investing client’s cash into short-term securities, pocketing an interest rate spread.
With the asset base of Charles Schwab growing at an impressive clip (nearly 60% last year), and the company moving into new tech-focused growth initiatives such as robo-advising and other initiatives, I expect to see this company continue to impress in both the short, medium and long term.
The amount of diversification investors are able to receive with Charles Schwab as an integrated financial services company is actually quite remarkable, and I would encourage investors to take a deeper look at this name as a long-term holding.
Invest wisely, my friends.