The retail investor boom should continue to be a tailwind for SCHW
As we kicked off 2021, we highlighted two top contrarian picks for the new year. Founder and CEO delivered one pick, Charles Schwab Corporation (NYSE:SCHW). Six months into the year, the bank stock has delivered a tidy gain of 35%. To access the entirety of the 2021 report, click here. Below, Bernie checked in on SCHW, while looking ahead to see what the stock has left for the final six months of 2021.
With my top pick SCHW trading in the low $50’s as 2020 had drawn to a close, I concluded my comments in the above space as follows: “The May 2018 all-time high at $60 is already within sights – with additional upside potential to the $70 area as the year progresses.”
My bullish assessment has proven too conservative, as the shares soon embarked upon a “take no prisoners” rally which peaked in early-June just above $76.
While our equity analysis and price projections are deeply founded in technical and sentiment analysis, we believe the fact that SCHW added 3.2 million new brokerage accounts in the first quarter 2021 – more new accounts than all of 2020 – added fuel to the already bullish technicals. We suggest that the retail investor boom is just getting started, and in this regard, we turn back the clock and note another price peak in SCHW – this one at $49.26 in April 1999, back in the days of the so-called “dot-com boom” – a stock trading craze that never approached the level of individual investor market participation that we now routinely experience.
True to this year’s form, the pullback by SCHW since the June peak has been quite modest. And while we do see the potential for a 10% pullback from the highs to the $68-$69 area (further buttressed by support at the steadily rising 50-day and 80-day moving averages), we expect more in the way of all-time high action from SCHW in the second half. Our first upside target is in the $80-area, at which point SCHW would be sporting a market capitalization of about $150 billion and a year-to-date gain of 50%.
