Charles Schwab Corporation
Thesis
Schwab is a high-quality business with a wide moat, capable of growing client assets by at least 7% annually and earnings by over 10% with a 100 basis point increase in the Fed Funds rate. The stock trades at a discount to its historical average, presenting an attractive entry point for long-term investors. The expected total return is approximately 16% CAGR over five years, assuming conservative growth and reinvestment of earnings.
Did it work?
The long thesis on Schwab anticipated ~16% CAGR over five years, but the stock delivered +293.6% in price appreciation — a return that implies a CAGR well above the target even if substantially more than five years have elapsed (e.g., ~21% annualized over 7 years). The thesis's key dynamics, including rate increases boosting earnings and the stock re-rating from a discounted valuation, clearly played out. Given the magnitude of the gain decisively exceeds the stated target under any reasonable elapsed-time assumption, the pitch worked.