International Herald Tribune – Vivienne Hsu of the Schwab Hedged Equity Fund bets on, and against, stocks according to ratings that her firm assigns. Otherwise, she might not own Payless ShoeSource,the fund’s second-largest holding.
“The last two pairs of Payless shoes I owned left my feet bleeding,” Hsu said. “I wouldn’t recommend the stock based on my experience, but it’s got a lot of good things going for it when youget down to it.”
Payless, which operates about 4,600 shoe stores, mainly in the Americas, amounted to 3.4 percent of Hedged Equity’s assets as of Jan. 31. Charles Schwab gives the stock its highest rating of A,equivalent to “strongly outperform,” under a system relying on criteria like price-to-earnings ratios and cash flow.
Hsu has beaten the Standard & Poor’s 500 Index during her two years at the $559 million mutual fund by relying on the ratings.
Schwab, the largest U.S. discount brokerage firm, started the A-to-F grading system in response to Wall Street investment banks’ $1.4 billion settlement in 2002 of cases tied to taintedresearch. Hedged Equity tests the company’s “fact-based” system, Schwab Equity Ratings, and Hsu’s ability to pick from among the 3,000 U.S. companies covered.
