Giverny Capital Asset Management, LLC, an investment management company, recently published its second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The model portfolio returned 13.70% this quarter, compared to the S&P 500's 15.20% return. YTD, the portfolio gained 5.89%, while the index increased by 10.21%. The long-term link between stock appreciation and earnings growth is strong; Benjamin Graham described the market as a "voting machine" in the short term and a "weighing machine" in the long term. Despite the S&P 500's 10.2% rise in the first half of the year, 210 stocks lost value, indicating market anomalies. High-quality earnings compounders that benefit from AI capabilities are likely to maintain their competitive edge. Recently, the market has increasingly chased momentum. Tech giants are taking advantage of the optimism of investors amid fears of an AI bubble. Despite strong profit margins, reliance on "moonshot" investments raises sustainability concerns. The author recommends investing in both emerging tech leaders and established firms. In addition, please check the Strategy's top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, Giverny Capital Asset Management highlighted The Charles Schwab Corporation (NYSE:SCHW). The Charles Schwab Corporation (NYSE:SCHW) is a multinational financial services company that provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. On July 20, 2026, The Charles Schwab Corporation (NYSE:SCHW) closed at $102.54 per share, reflecting a market capitalization of $178.33 billion. The Charles Schwab Corporation (NYSE:SCHW) posted a one-month return of 10.06%, while its shares gained 7.50% over the past 52 weeks.
Giverny Capital Asset Management stated the following regarding The Charles Schwab Corporation (NYSE:SCHW) in its Q2 2026 investor update:
"Roughly 40% of the Index outperforming the average and 60% underperforming is not so unusual, but two-thirds of that lagging group underperforming by more than 10 percentage points seems like a lot. Even this level of dispersion might make sense if most of the earnings growth in the Index was concentrated in the 200 stocks that were up double digits. This is not the case. We own Index constituents such as The Charles Schwab Corporation (NYSE:SCHW), JP Morgan, Mastercard and Progressive Corp. that continue to grow their earnings per share at healthy rates and in some cases at higher rates than usual, but whose stock prices are lagging.
Schwab, for example, earned $4.87 per share in 2025 and the consensus of Wall Street analysts calls for earnings per share, or EPS, of $7.62 in 2027. That would represent a two year growth rate of 56%, or 25% per year. As of June 30th, the shares were down 8% for the year and trading at $92.27, or 12 times the 2027 EPS estimate. The Index trades for more than 20 times the forward estimate. We added to Schwab during the quarter, making it our third-largest position."
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