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  5. SCHW: Wealth simple mentions that investors are betting U. [Charles Schwab Corporation (The)]
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Q: Wealth simple mentions that investors are betting U.S. $3.7 billion that TD is heading south. 12 billion in unrealized losses on bonds, big stake in reeling Charles Schwab, massive exposure to teetering Canadian housing market, and terrible timing on purchase of U.S. regional bank. Any thoughts you could share on this?
Asked by Anthony on April 10, 2023
5i Research Answer:

TD certainly has had some recent issues, but the 9X earnings valuation at least partially reflects these. The short interest ($3.7B) was more of a media event than anything else. On a percentage basis short interest is only about 4%, not out of line with many other stocks and only percentage point or so more than other banks. Its US acquisition could be re-priced or even cancelled. All banks have housing exposure. TD owns about 9% of SCHW but the US bank crisis seems to be abating a bit. We are not discounting any of these problems, but they are widely known and are getting lots of media attention, so the stock price at least reflects this: buyers know what they are getting into. It may take a while for things to settle in, but we would not panic here.