A Big Upgrade for Charles Schwab

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Every day, the sun rises on Wall Street, and a plethora of professional analysts wake to issue new opinions on stocks. Here at the Fool, we use our "This Just In" column to examine some of these picks -- and the track records of the firms behind them -- so individuals can make better investing decisions.

In addition to following professional banks, anyone can use Motley Fool CAPS to monitor the collective opinions of more than 115,000 members, many of whom demonstrate better investing insight than published analysts do.

Enough top-performing CAPS members have turned bullish on Charles Schwab (Nasdaq: SCHW) recently to upgrade it from its three-star rank to a more formidable four stars. A total of 443 members have given their opinion on Charles Schwab, with many of them offering analysis and commentary explaining the recent optimism.

Commanding what is arguably the leading brand in the space, Charles Schwab has deftly leveraged its status with consumers as a discount broker to enter other financial-service categories. It also helps that the trusted asset manager hasn't had nearly the level of teething pain that discount competitor E*Trade (Nasdaq: ETFC) has experienced. E*Trade posted a second-quarter loss and took charges for selling losing positions in Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).                 

Schwab has been riding out the recent financial turmoil with a small 1% second-quarter gain in net income, reaching $295 million. Volatility has been one of Charles' good friends lately, as market conditions drove in new customers and stronger trading activity for the quarter. With relatively little exposure to subprime lending or mortgage-backed securities, the strong capital base and liquidity even allowed it to hike its dividend by 20%.

After Bear Stearns was sold to JPMorgan Chase (NYSE: JPM), Schwab increased its talent roster with independent brokers it picked up from Bear. It could also be a big beneficiary of departing Merrill Lynch brokers after Bank of America (NYSE: BAC) made a big move ahead of giant Citibank (NYSE: C) by hooking up with Merrill. Overall, the opportunities give 92% of the CAPS members rating Charles Schwab confidence that the firm will outperform the market.

To see what the very best CAPS analysts are saying now about Charles Schwab -- as well as other winning stocks they are picking -- head on over to CAPS and have a look.

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