Schwab Heads List of Top Notch Stock Pickers
Who's the World Champ? by Vito J. Racanelli
Highlighted companies: Charles Schwab Corp. (SCHW), Bank of America Corp. (BAC), J.M. Smucker Company (SJM), Chevron Corp. (CVX), Martin Marietta Materials Inc. (MLM), Genesee & Wyoming Inc. (GWR), Phillips-Van Heusen Corp. (PVH), Ultra Petroleum Corp. (UPL), ENSCO International Inc. (ESV), Helmerich & Payne Inc. (HP), Morgan Stanley (MS)
Summary: Barron's semi-annual ranking of brokerage houses' top-stock recommendations. The article looks at the 'best-idea' lists of 12 large brokers over various time periods, highlighting which brokers consistently pick the best stocks, and sharing some of their picks. Top broker: Short horizon (6m-1yr) -- Morgan Keegan (35.35%). Long horizon (3-5yrs) -- Charles Schwab Corp. (SCHW) (74%). Schwab: Schwab's 5-yr 74% achievement is remarkable; the S&P 500 returned just 13% in the same period, and its closest competitor, Morgan Stanley (MS), made just 24%. Also noteworthy is that Schwab's picks are chosen by a quantitative system with minimal analyst input; they eschew a high-priced research staff in order to cut commissions. Schwab declines to reveal the secrets of their picks, but does offer the following: They apply 18 measures -- such as valuation, sentiment, risks to revenue, and momentum -- to their Buy-rated stocks to come up with 100 top names, mimicking the broad market's sector weightings. Free cash-flow ratings and asset utilization measures are among the most important factors, along with companies that, "are more likely to report above forecast earnings than the average." Recent additions: Bank of America Corp. (BAC) and J.M. Smucker Company (SJM) -- Schwab believes their prices don't reflect their fundamental strength. Recent removals: Chevron Corp. (CVX) and Martin Marietta Materials Inc. (MLM). Morgan Keegan: Their focus list profited from positions in the consumer discretionary, energy, and industrial sectors, along with a number of small- and mid-cap names that aren't tracked by big brokerages. Recent additions: Genesee & Wyoming Inc. (GWR) and Phillips-Van Heusen Corp. (PVH). Recent removals: Ultra Petroleum Corp. (UPL), ENSCO International Inc. (ESV), and Helmerich & Payne Inc. (HP).
Quick comment: Phil McCallister takes a look at three big online brokers, including Schwab • But will startup Zecco's plans to offer commission-free stock trades undermine traditional online brokers? • Schwab's Resurrection • Seeking Alpha's own sentiment barometer: our most popular email subscriptions by ticker, sector, and theme • On Seeking Alpha's home page, you can find links to contributors' latest long and short ideas.
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