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Schwab's Stock-Picking Ideas Take First Place in Barron's
Competition for Second Consecutive Year
Model Portfolio Based on Schwab Equity Ratings Delivers a 53% Return Over Three
Years
SAN FRANCISCO, Jan. 24 /PRNewswire-FirstCall/ -- A model stock portfolio
constructed by Charles Schwab & Co., Inc. and based on Schwab Equity
Ratings(R), outperformed the S&P 500 Index as well as all competing brokerages'
portfolios in Barron's annual stock selection competition, as reported in the
January 22 issue. Based on data compiled by Zacks Investment Research, an
independent company that analyzes broker research, Charles Schwab's portfolio
took first place for the three-year period 2002-2004, producing substantially
greater returns than any of the 13 competing brokerages. For the three-year
period ended December 31, 2004, Schwab's picks returned 53%, compared to the
S&P's 11% and the second place winner's 31%. Schwab took first place in the
same category last year, returning 18.3% for the 2001-2003 period compared to a
12% drop in the S&P 500.
"Schwab Equity Ratings have once again proven their effectiveness at
identifying high-performing stocks, especially over the long haul," said Greg
Forsythe, senior vice president, Schwab Equity Ratings. "Simple luck or a
well-timed focus on hot sectors can boost a portfolio's performance in the
short term, but taking the Barron's gold twice for three-year performance --
during periods that included steep bear and bull markets -- demonstrates the
true proficiency of Schwab's ratings. We are hard at work developing new
investment products that feature a methodology of investing in A- and B- rated
stocks to augment the line-up of Schwab Equity Ratings-powered products already
available."
Schwab's clients have access to the ratings on schwab.com and can use them as a
component of their own research. The ratings are also the basis for the stock
recommendations Schwab provides to Schwab Private Clients and Schwab Advised
Investing clients. Schwab offers seven mutual funds which rely on Schwab
Equity Ratings, all of which have delivered highly competitive returns in their
respective categories. For example, the Schwab Dividend Equity Fund, designed
to take advantage of the reduced tax on qualified dividend income, returned
nearly 24% since its launch in Sept. 2003. (Standardized performance for the
Schwab Dividend Equity Fund was 16.59% for one year as of 12-31-04 and 23.86%
since inception.) For more information, go to
http://www.schwab.com/public/schwab/advice_research/schwab_equity_ratings and
http://www.schwab.com/serfunds.
About Schwab's Model Portfolio
Schwab's model portfolio consists of 100 of the 1,000 largest market cap
companies in the U.S. In developing the portfolio, Forsythe conducts a
vigorous monthly review of these stocks using Schwab Equity Ratings'
disciplined approach to stock selection, focusing on fundamentals, valuation,
momentum, and risk. Stocks that no longer meet Schwab's strict criteria are
dropped from the list and replaced by more highly rated stocks.
Barron's Brokerage Scorecard
2002 - 2004
Charles Schwab 53.10%
Credit Suisse FB 30.91
Banc of America 29.70
Bear Stearns 27.55
Morgan Stanley 11.74
Raymond James 11.40
Lehman Bros 10.77
Goldman Sachs 9.32
Edward Jones 8.85
A.G. Edwards 8.68
Smith Barney 5.73
Merrill Lynch 4.63
RBC Dain Rauscher 0.40
Morgan Keegan NA
Standard & Poor's 500 11.16
Source: Barron's, Jan. 22, 2005
About Schwab Equity Ratings
Schwab Equity Ratings offer an objective and disciplined assessment of
approximately 3,000 U.S. equities, more than any other major brokerage firm.
Stocks are assigned grades of A, B, C, D, or F, reflecting performance
potential over the next 12 months. Schwab's outlook is that "A"-rated stocks,
on average, will strongly outperform, and "F"-rated stocks, on average, will
strongly underperform the equities market over the next 12 months. The ratings
assess four broad categories: fundamentals, valuation, momentum, and risk. They
are updated each week to reflect new financial data and other information.
On average, Schwab Equity Ratings A-rated stocks outperformed the Dow Jones
Wilshire 5000 Composite Index in the 52-week period from January 12, 2004
through January 10, 2005. The average performance of all stocks rated A on
January 12 2004, through the 52 weeks up to January 10, 2005 was 18.56%
compared to a return of 8.14% during that period for the Index. The average
performance of all stocks rated F on January 12, 2004 through the 52 weeks to
up to January 10, 2005, was -0.11%. For more information on Schwab Equity
Ratings, including performance details, how performance was calculated,
comparison of performance to benchmarks and limitations of model performance,
visit http://www.schwab.com/serperformance.
About Charles Schwab
The Charles Schwab Corporation (NYSE:SCH) Nasdaq, through its operating
subsidiaries, provides securities brokerage and financial services to
individual investors and the independent investment advisors who work with
them. With over 7 million individual investor accounts and more than $1
trillion in client assets, The Charles Schwab Corporation is one of the
nation's largest financial services firms. Its subsidiary Charles Schwab & Co.,
Inc. (member SIPC) provides a complete range of investment services and
products, including an extensive selection of mutual funds; financial planning
and investment advice; retirement plans; referrals to independent fee-based
investment advisors; and custodial, operational and trading support for
independent fee-based investment advisors. Its subsidiary Charles Schwab Bank
(member FDIC) provides banking and mortgage services and products. The
corporation's other operating subsidiaries include U.S. Trust Corporation
(member FDIC) and CyberTrader(R), Inc. (member SIPC). These companies' Web
sites can be reached at http://www.schwab.com/, http://www.schwabbank.com/,
http://www.ustrust.com/, and http://www.cybertrader.com/.
Limitations of Model Performance:
For all model performance results, there are inherent limitations which
investors should understand. Unlike an actual performance record, simulated
results do not represent actual investment performance or trading. Since the
trades have not actually been executed, the results may have under- or over-
compensated for the impact, if any of certain market factors, such as the
effect of limited trading liquidity. No representation is being made that any
investor will or is likely to achieve results similar to those shown. The
results presented reflect past performance and should not and cannot be viewed
as an indicator of future performance.
The results shown are not an indicator of the returns a Schwab client would
have realized or will realize in relying on Schwab Equity Ratings or any stock
list or model mentioned. Schwab Equity Ratings and the lists or models
mentioned are not personal recommendations for any particular investor and do
not take into account the financial, investment or other objectives and may not
be suitable for any particular investor. Before buying, investors should
consider whether the investment is suitable for themselves and their portfolio.
Additionally, investors should consider any recent market or company news.
Stocks can be volatile and entail risk and individual stocks may not be
suitable for you. Indexes are unmanaged, do not incur management fees and
expenses and cannot be invested in directly.
Barron's Competition:
All hypothetical buy and sell trades were charged a 1% commission and assumed
to take place at the stock's closing price. Performance of the portfolios
submitted was calculated using an equal-weighted return methodology that is
administered by Zacks; whereas the performance of the S&P 500(R), as noted by
Barron's, is stated as the capitalization-weighted return. The S&P 500 Index
represents a list of 500 leading companies from leading industries. Each
brokerage firm had its own methodologies in picking its stock lists, which
differed in many respects, including the number of issues held, frequency of
trading and changes of selection criteria over time. Barron's is a registered
trademark of Dow Jones & Company, Inc. All rights reserved.
Schwab Equity Ratings Cohort Performance
Schwab creates five cohorts (defined as those stocks that received the same A,
B, C, D or F rating that week). Schwab calculates the total return for each
stock in each A, B, C, D and F rating cohort assuming a 52 week holding period.
All hypothetical buy and sell trades were assumed to take place at the stock's
closing price. Transaction costs such as brokerage commissions, fees or other
expenses have not been deducted from the total return calculations. Results
would have been lower if such costs were deducted. Any dividends incurred were
treated as non-interest bearing cash and not reinvested. The 52 week
performance for each Cohort is calculated as the equal weighted average of all
the simple total returns associated with each stock in that Cohort. The Dow
Jones Wilshire 5000 Composite index is a capitalization weighted index of over
6500 stocks and treats dividends as reinvested.
Performance of a single stock or group of stocks within a Schwab Equity Ratings
model performance cohort can vary greatly from the performance of that cohort.
Investors would not likely be able to achieve the same performance as that
discussed for various reasons explained in detail on schwab.com.
Mutual Funds
Past performance is no indication (or "guarantee") of future results. Visit
schwab.com for month-end performance information. Investment value will
fluctuate, and shares, when redeemed, may be worth more or less than original
cost. Investors should carefully consider information contained in the
prospectus, including investment objectives, risks, charges and expenses. You
can request a prospectus by calling Schwab at 800-435-4000. Please read the
prospectus carefully before investing. (0005-6533)
DATASOURCE: Charles Schwab
CONTACT: Sondra Harris of Charles Schwab, +1-415-636-3292, or
Web site: http://www.schwab.com/