Charles Schwab Corp (SCHW-N)

He likes the financial sector and thinks this company is overvalued; his model price is $37.77. As interest rates move up earnings should be improving, but he feels the value is running ahead of itself right now. He would buy on weakness.

He likes the financial sector. This company has used technology to make the customer experience better. Over 40% of their earnings come from simple net interest margins on deposits. Asset management fees account for another 40% and it grew by 56% per year. This company is able to drop prices, but still increase earnings. Yield 0.7%. (Analysts’ price target is $60.78 )

He really likes financials. This is a play on a resurgent private client investor. Their new assets last year grew 58%. 40% of earnings come from net interest margin, the money they make holding cash for their clients, and they are a clear winner for rising rates. They get 40% from asset management. As client assets grow, their fees grow. As new money comes in, their fees grow. They were the 1st to start a big Robo advisor in the US. This is a growth company that benefits in a number of different ways. Dividend yield of 0.8%. (Analysts' price target is $61.33.)

The chart shows this is still going up, but something that is still a little concerning is that it has kind of gone up parabolically in the last little while. At worst, he thinks it is going to want to pause. A really good space to be in. He would look for it to go sideways before it continues on. This is one he would hang onto. It's part of the pro-growth theme.

Retail and private investors are becoming more engaged with markets. There was $700 trillion in wealth created last year in the US. This company has about 10 million accounts, and are opening 100,000 accounts a month. 1% growth a month is not so bad. Their asset management and advisory business is growing very nicely. They have about $3 trillion in clients’ assets and hold a tremendous amount of cash. As rates go up, the margins they make is very, very good. Dividend yield of 0.6%. (Analysts' price target is $50.)