Charles Schwab (SCHW, Financial) contributed 104 basis points to the Fund’s return, as its stock rose from $41.53 to $47.56 for a total return of 16.4%. The return on our average cost, however, was significantly higher at 52%. How is this possible, you may ask? In October, Schwab shocked the market by eliminating trading fees, causing its stock to fall sharply to a low of $35.10 as investors fretted over the lost profits. We added to our position after the drop, because we believed that eliminating trading fees would improve Schwab’s competitive position and highlight its diversified earnings model. Sure enough, Schwab took advantage of its enhanced competitive position faster than even we expected, when it announced in November that it would acquire competitor TD Ameritrade for $26 billion. The stock rallied to end the year, as investors celebrated the anticipated 15% to 20% earnings accretion from the acquisition.
From Jerome Dodson (Trades, Portfolio)'s Parnassus Endeavor.Fund fourth-quarter 2019 commentary.
