In his Stellar Stocks Alert, newsletter advisor Richard Schmidt sees long-term opportunity in select brokerage stocks. Here, he looks at Charles Schwab (NASDAQ: SCHW) and E*Trade (NASDAQ: ETFC).
"Some of the strongest financials in the world have lost 60%, 70%, even up to 90% or more of their value in the last year. Shares of Charles Schwab have come down too. But the stock has lost less than 50%, at its worst.
"Most of that has come since October. We had hoped the stock would bottom. But the stock continued to drop through support, meaning the downtrend is still in place. We may eventually see it go down by more than 50%.
"But there aren't many financials I want to own right now. SCHW is one I'm glad to own. It's one of the few profitable brokerages. SCHW is a strong buy.
"We have also been asking if the worst is behind E*Trade. I think it is. It's still early, but the technicals are shaping up nicely. A bottom is quickly forming, and it's already pushed up through the 50-day moving average.
"The company has worked hard to deleverage its balance sheet and selling assets to cash. And, for the first time in five years, the company is finally growing again. No, it's not profitable.
"But during one of the worst markets in history, the company has seen an 18% increase in its daily average revenue trades.
"After adding 97,000 new accounts in the fourth quarter, it now has 4.5 million customer accounts. And it has $3.5 billion in net asset inflows. Not bad for a company who most people wrote off as dead. ETFC has a long way to go. But it's headed in the right direction.
"ETFC is still a hold until the bottom is confirmed and we get a strong buy signal. But that may be sooner than anyone expected.
"And with bailout money coming into the banks and mortgage companies, it might be enough to get the company and the stock moving again. If not, we would expect a buyout in short order."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
Disney Starts Off the New Fiscal Year with Solid Results
Before the Bell: Futures Higher on Greece Rescue Hopes
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Reader Comments (Page 1 of 1)
2-24-2009 @ 12:08PM
zooper said...
ETFC has definitely hit the bottom. E*Trade was one one the first to cut loose at the end of 2007. The only way is up now.