Bernie Schaeffer — founder and CEO of Schaeffer's Investment Research — returns to Charles Schwab (SCHW), which was his Top Pick in 2021 and is again his favorite for 2022 after rising over 60% in the past year.
Schwab was my top pick for the year at the start of 2021. In my June 2021 update I stated that I saw the potential for a 10% pullback to the $68-$69 area (from the peak earlier that month at $76).
But I expected more in the way of all-time high action from SCHW in the second half of this year, with my first upside target in the $80-area (at which point the company would be sporting a market capitalization of about $150 billion).
SCHW shares proceeded to put in a low just below $66 in July, before marching steadily higher all the way to a peak at $86.43 on 12/28/21 — and closing out the year at $84.10.
I also opined that the retail investor boom was just getting started, and in this regard, we turn back the clock and note another price peak in SCHW — this one at $49.26 in April 1999, back in the days of the so-called “dot-com boom” — a stock trading craze that never approached the level of individual investor market participation that we now routinely experience.
And so with SCHW recently reporting a surge in total client assets of 23% from November 2020 to November 2021 (with the 2020 figure already inclusive of the big pop in assets from the TD Ameritrade merger), I now:
1) Reiterate my belief that it's still early days for the investor/investment boom we began to experience over this past year, and
2) Set an upside target for SCHW shares of $100-$110 for 2022 (which could result in a surge in its market capitalization to the $200 billion mark and beyond).
Moving from the fundamental side to the technical, a new "Buy" signal has just been generated from SCHW's 20-day Relative Momentum Index on its rally above the 70 mark (see second panel in chart below).
And finally — on the sentiment front — we note that less than 1% of total open interest in SCHW options is currently at strike prices higher than the 90 level (source: CBOE's Trade Alert).
However, if SCHW shares continue to press higher as we expect, the result could be a deluge of new opening positions in SCHW call options at strikes of 100, 110 and higher — which could in itself create a surge in share buying in 2022 as option sellers look to hedge their big upside exposure.
