If a CEO is buying a large amount of company stock, it’s often worth investigating the stock further. CEOs tend to have an intimate understanding of their businesses and are usually way ahead of analysts and portfolio managers when it comes to revenue and earnings trends.
Here, we are going to highlight stock purchases from the CEO of Charles Schwab Corp (SCHW: US). Charles Schwab is an American multinational financial services company. Through its subsidiaries, it offers a full range of broking, banking, and financial advisory services. Overall, the business has around $7.86 trillion of total client assets. It’s listed on the New York Stock Exchange and currently has a market capitalization of €130 billion.
Charles Schwab: Insider Buying
Our insider transaction data shows that between April 25 and April 29, the CEO of Schwab Charles, Walter Bettinger, purchased 140,000 shares at an average price of $68.10 per share. This trading activity cost the insider around $9.5 million and increased his holding to 432,625 shares.
We are of the opinion that this insider buying is noteworthy for two main reasons.
Firstly, Mr. Bettinger has been the CEO of Charles Schwab for 14 years so probably knows the company better than anyone else. Since taking over at the helm of the company, he has increased the market capitalization of the business 10-fold. It is therefore significant that he is buying shares, as it suggests he feels there is more appreciation in the share price to come.
Secondly, the CEO has spent a significant amount of money on SCHW stock and has upped his holding in the business by nearly 50%. This suggests to us that he is extremely confident in the future prospects of the business.
Schwab Charles continued to see strong trading levels among its clients and an inflow of new assets in the first quarter of 2022 which meant that its financial performance was solid, despite headwinds such as inflation and the war in Ukraine having an impact on the company.
The net revenue figure of $4.67 billion for the quarter was just 1% below the $4.72 billion achieved a year prior when trading was exceptionally strong. Net income on a GAAP basis was $1.402 billion which was a slight decrease of 6% in Q1 2021.
During the quarter, the company opened 1.2 million new brokerage accounts and $121 million of core net assets came into the business. At the end of March, the company had 33.6 million active brokerage accounts and $7.86 trillion in client assets – this was an increase of 5% and 11% respectively year on year.
“Our diversified revenue model, along with disciplined expense management that aims to balance near-term profitability and long-term investment, enabled us to achieve a pre-tax profit margin of 39.4% – 44.7% on an adjusted basis. We believe the relative resiliency of our first-quarter revenues and profitability represents solid performance in the face of significant environmental headwinds,” commented CFO Peter Crawford.
Having scrutinized these resilient Q1 figures, we believe the recent buying of SCHW stock by its CEO to be a bullish event. The CEO has a proven track record at the company and in buying up a large tranche of company shares, he is signaling that he believes the shares are priced attractively at these levels.