Charles Schwab Sees Heavy Insider Buying During Banking Sector Crisis

3 minutes read
Page's meta description as image.

Insider transactions can give investors a more complete view of what’s going on within a publicly-traded company. No one has more information in relation to an organization's prospects than its executives and directors.

In this report, we are going to highlight some interesting insider buying at Charles Schwab Corp (SCHW:US). Charles Schwab is a financial services firm that provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The company, which serves individuals and institutional clients in the US, Puerto Rico, the UK, Hong Kong, Singapore, and Australia, is one of the largest banks in the US by assets. It’s listed on the New York Stock Exchange and currently has a market capitalization of approximately $98.73 billion.

Insider Buying at Charles Schwab

2iQ data shows that between March 14 and March 17, nine insiders at Schwab bought company stock. Those who bought shares included:

  • Co-Chairman and CEO Walter Bettinger (50,000 shares @ $59.31 per share)

  • CFO Peter Crawford (5,000 shares @ $57.96 per share)

  • President Rick Wurster (7,000 shares @ $55.83 per share)

In total, the nine insiders invested around $7.57 million in company stock.

Cluster Buying Pattern

This buying activity is notable for several reasons.

Firstly, we have a clear ‘cluster buying’ pattern here. Cluster buying (when three or more insiders at the same company are buying stock simultaneously) is one of the most bullish insider transaction patterns.

Secondly, a number of top-level insiders, including the CEO and the CFO, have purchased stock. Top-level insiders tend to have the most information on their companies.

Third, all of the insiders have made large purchases. The purchase from CEO Walter Bettinger was particularly large, at around $3.0 million. It’s worth noting that Mr. Bettinger has made well-timed stock purchases in the recent past.

Dragged into the Banking Crisis

Schwab’s share price has taken a hit this month amid the banking sector crisis in the US. Investors have been concerned that the company may have liquidity issues similar to those observed at Silicon Valley Bank (SVB), which was recently declared insolvent.

The share price fall here looks excessive, however. Schwab is in a very different position to SVB as its bank deposits are backed by a healthier mix of securities relative to the Californian bank. It also has a much broader client base and a more diversified business model. It’s worth pointing out that the company has said that it has an estimated $100 billion of cash flow on hand if it requires access to liquidity.

"We believe the price action in SCHW is overdone, due to SCHW's strong liquidity profile and diverse and differentiated deposit base," wrote analysts at Morgan Stanley in a recent research note.

Clearly, those within the company see the share price fall as a buying opportunity. We view the insider buying activity as a bullish signal.