How are the Schwab Stock Lists created?
We rate approximately 3,000 stocks
Schwab's Center for Financial Research uses an objective and disciplined approach to rank approximately 3,000 U.S. headquartered equities.
Schwab's Center for Financial Research ("SCFR") designed the methodology used to create Schwab Equity Ratings. The SCFR team has decades of collective experience delivering stock selection models to institutional investors, and is focused on adapting its sophisticated research to the needs of Schwab's individual investors. SCFR supports Schwab's investment advice on individual equities, with an emphasis on producing objective, relevant, and useful research for Schwab's individual investors.
We then eliminate volatile micro cap and penny stocks
In order to avoid those stocks that tend to be more volatile, we then eliminate from consideration stocks with market capitalization of less than $250 million and prices less than $5.
We then eliminate stocks with extremely high share prices
Given the desire of many investors to invest in round lots, stocks with high share prices may be difficult to incorporate when constructing a well diversified portfolio. As a result, we have eliminated from consideration stocks with prices greater than $300 per share.
We then eliminate stocks with current pertinent news
Each week, we monitor news sources for potentially significant business events involving A and B rated stocks. For the stock lists, we exclude from consideration stocks with an asterisk denoting current pertinent news. The absence of an asterisk does not imply that there is no current pertinent news on a particular stock.
- Large & Small Cap List
- Sector List
- Composite List
We sort our stocks into "large cap" or "small cap"
We sort the list of stocks by size, as determined by market capitalization. The largest 250 stocks by market capitalization are candidates for the large cap lists. Those not among the 250 largest stocks by market capitalization are candidates for the small cap lists.
We determine whether a stock is "growth" or "value"
Next, we rank the stocks on the basis of their relative price/earnings and price/book ratios. Stocks ranked in the highest 40% are candidates for the growth lists and those ranked in the lowest 40% are candidates for the value lists.
We list the top-ranked stocks
Each week, Schwab's Center for Financial Research then selects the top 10 stocks that meet the criteria above.
We sort the stocks by sector
Each stock is classified into one of 10 sector categories based on the company's primary business activities.
We list the top-ranked stocks
Each week, Schwab's Center for Financial Research then selects the top 5 stocks in each sector. If fewer than 5 stocks are rated "A" or "B" in a given sector, fewer than 5 will be displayed.
There could be weeks in which no stocks are eligible for a given list because there are no "A" or "B" rated stocks in that sector that week.
We sort the stocks by sector
Each stock is classified into one of 10 sector categories based on the company's primary business activities.
We list the three top-ranked stocks
Each week, Schwab's Center for Financial Research selects the top 3 stocks from each of the 10 sector lists and displays them in one composite list.
View the Schwab Composite List
Additional Schwab Stock List Details
How frequent are Schwab's Stock Lists updated?
The Schwab Stock Lists are generally updated weekly by Schwab's Center for Financial Research to reflect changing market conditions and company information.
Why are stocks added or removed from Schwab's Stock Lists?
The Schwab Stock Lists are generally updated weekly by Schwab's Center for Financial Research to reflect changing market conditions and company information. Stocks may be removed from Schwab's Stock Lists without a change to their Schwab Equity Rating because another stock has become relatively more attractive, or because something has changed about the stock that caused its Schwab Equity Rating to fall. If a stock in which you are interested in has been removed from the Stock List, you may want to check its current Schwab Equity Rating and conduct additional research (i.e., check current news) to see if its potential investment prospects have changed.
Why is there a Composite List?
If you are looking for stocks in several sectors, or just looking for an investment idea, the Schwab Composite Stock List is a good place to start. It contains our three top-rated stocks from each sector list and can be a great source of new stocks to research.
Growth and Value Strategies
How does Schwab determine whether a stock is "Growth" or "Value"
In order to determine whether a stock is "Growth" or "Value", first we rank all of the approximately 3,000 rated stocks be their relative price/earnings and price/book ratios. Stocks ranked in the highest 40% by P/E and P/B are categorized as "Growth" stocks and those ranked in the lowest 40% are categorized as "Value" stocks.
What is a growth strategy?
A growth strategy seeks to identify companies with potential for rapidly increasing sales and earnings in the hopes that their stock prices may increase as well. This strategy determines the attractiveness of a stock by using the underlying fundamentals of a business to gauge the potential for the company's rapid growth.
What is a value strategy?
A value strategy seeks to identify stocks that have been overlooked by the market, in the hopes that prices will rise if and when investors realize the companies' true potential. These companies tend to be viewed as neglected or out-of-favor stocks that also may have seen drops in prices due to market conditions or superficial changes rather than problems in their underlying business.
Which strategy is better, growth or value?
Historically, growth and value strategies have each shown periods of superior returns. The relative effectiveness of a growth or value strategy can depend heavily upon the market environment. Investors who do not have a strong growth or value orientation may want to diversify by buying a combination of growth and value stocks.
Is a growth strategy right for me?
Growth investors typically look for companies in new and developing industries that they think will experience significant appreciation relative to the rest of the market. If you are highly optimistic about the future of growth firms, and are also highly tolerant of risk, you may be interested in a growth strategy. However, these stocks can be unstable and carry large downside risk. You could end up paying high prices hoping for positive future earnings that may never be realized.
Is a value strategy right for me?
Value investors typically look for companies in out-of-favor industries, whose stock is selling cheaply relative to current fundamentals such as sales, earnings, or book value. The key to a value strategy is accurately evaluating the worth of a company to see if it's a bargain or not and to avoid stocks with poor fundamentals that deserve their low stock price valuations. If you think of yourself as a bargain hunter and a patient investor looking to hold stocks for the long term, you may want to investigate the value strategy.
Which Stock Lists are right for me?
In order to help protect your portfolio from the ups and downs of the market, it's important to diversify. Investing across sectors and styles, and in both large and small cap stocks is a great way to diversify.
In order to help you build a well-diversified portfolio, we have created the Schwab Stock Lists. These lists will help you find ideas to research based on your portfolio needs.
Is the Schwab Composite Stock List right for me?
If you are looking for stocks in several sectors, or just looking for an investment idea, the Schwab Composite Stock List is a good place to start. It contains our three top-rated stocks from each sector list and can be a great source of new stocks to research.
Are the Schwab Large and Small Cap Stock Lists right for me?
Schwab recommends that investors diversify their stock portfolios across stocks of different sizes and investment styles. To help you do this, we've created lists of our top-rated Large Cap Growth, Large Cap Value, Small Cap Growth and Small Cap Value stocks. Consider these lists if your portfolio is weighted too heavily toward one style or size.
Are the Schwab Sector Stock Lists right for me?
Schwab recommends that investors diversify their stock portfolios across sectors in a way that reflects the overall U.S. stock market. Consider these lists if you are looking to balance the sectors in your portfolio.
For example, if you have determined that your portfolio needs more health care stocks, you can use the Schwab Health Care Stock List to identify our top rated stocks in that sector. To find out if your portfolio is diversified across sectors, see Portfolio Checkup.
Schwab's Stock Investing Philosophy
How is the Schwab Equity Ratings different?
At Schwab, our philosophy is that an unbiased, objective perspective is an essential ingredient to long-term investment success.
Schwab Equity Ratings Are Systematic
Schwab Equity Ratings are produced using a systematic research approach containing investment criteria that have historically been related to stock price performance. This emphasis on facts produces consistent, objective equity evaluations.
Schwab Equity Ratings Are Objective
The Schwab Equity Ratings approach is not biased towards specific stocks or industries. This results in an objective perspective that you can trust.
Schwab Equity Ratings are Unbiased
Schwab Equity Ratings' unbiased, systematic approach produces virtually the same number of stocks with Buy guidance (A or B ratings) and Sell guidance (D or F ratings) - each at approximately 30%.
Schwab Equity Ratings are Consistent
The Schwab Equity Ratings approach rates the investment attractiveness of each stock using consistent, time-tested investment criteria.This approach enables you to easily compare stocks across different industries and sectors.
