Jeff Mortimer - Schwab Core Equity - SWANX
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Date updated:02-25-2007

In its December 4th issue, Barron’s profiled Jeff Mortimer, CIO of equities at Charles Schwab and co-manager of the firms successful Schwab Core Equity Fund. The fund utilizes a strictly quantitative approach, with a system that looks at valuation, momentum, fundamentals and risk. As Mortimer stated himself in the profile, “we don’t put technical analysis on top of it. We don’t do anything to stand in its way”

The funds performance has proven the success of the quant system, outperforming the S&P 500 in 3 and 5 year periods.

With regards to how he views investing, Mortimer is quoted as saying that firms that can get a high cash return on their investments and have a history of beating earnings expectations tend to have good fundamentals, and fundamentals makes up about 50% of their systems rating on a stock. Valuation makes up 20%of the rating, and companies that have a lot of cash liquidity do well in that area. Momentum, another 20% of the system, is based not only on price performance of the stock but also improving analyst forecasts and decreasing short interest. The remaining 10% of the system looks at risk, which is based on market cap and stability of sales growth.

In certain situations that fall outside of the realm of the rating system, the managers have to step in and make discretionary calls. Litigation and spin-offs that nullify past financials are 2 situations that force the managers to step in and decide whether a stock should remain in the portfolio or be kicked out.

Below are some of the funds top holdings and a few descriptions by Mortimer on how the fund came to invest in those companies.


Current Returns:

1-Year: 15.40%
3-Year: 13.46%
5-Year: 10.06%

symbol name last price % change open
  • +
  • HPQ
    Hewlett Packard C
  • $37.00
  • -3.90%
  • $36.23

According to Barron's, the fund bought the stock at 27 in 2005. It now trades closer to 40.

People owning HPQ also tend to own: ACASCLPMRKPHISHFLVZAA

TheStreet.com Rating: B What is this?

  • +
  • BA
    Boeing Co
  • $41.80
  • -5.88%
  • $40.13

This company has earned top grades in the system for its free cash flow and good management of working capital. "Boeing has beat or met expectations for the last 14 quarters" Mortimer is quoted as saying in the article. The fund purchased the stock at 51 in 2004, and it now trades above 88.

People owning BA also tend to own: AIGCCPWRDISFWLTGSHAL

TheStreet.com Rating: C+ What is this?

  • +
  • MET
    Metlife Inc
  • $30.25
  • +8.04%
  • $26.82

"It has very high cash on its balance sheet, which is a very good precursor for market strenght"

People owning MET also tend to own: AAALLAPCBABACCCAT

TheStreet.com Rating: B What is this?

  • +
  • BEN
    Franklin Res Inc
  • $65.01
  • +7.60%
  • $58.45

Purchased in early 2005 at 68, currently trading at 106.74

People owning BEN also tend to own: AAPLBABMYCOSTGLDGOOGIAAC

TheStreet.com Rating: B What is this?

  • +
  • XOM
    Exxon Mobil Cp
  • $62.36
  • -8.29%
  • $63.86

No Analysis added

People owning XOM also tend to own: AAAIGIBMINTCJNJJPMKO

TheStreet.com Rating: B What is this?

  • +
  • PFE
    Pfizer Inc
  • $15.14
  • -3.38%
  • $14.83

No Analysis added

People owning PFE also tend to own: AAALLAPCBUDCOPCVXDOW

TheStreet.com Rating: C+ What is this?

  • +
  • LMT
    Lockheed Martin C
  • $87.48
  • -4.91%
  • $88.90

No Analysis added

People owning LMT also tend to own: AIGALLBACCCATCBSCOP

TheStreet.com Rating: A+ What is this?

  • +
  • IBM
    Intl Business Mac
  • $87.75
  • -1.40%
  • $87.41

No Analysis added

People owning IBM also tend to own: AAPLAMDCSCODELLGOOGINTCMSFT

TheStreet.com Rating: A- What is this?

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