Charles Schwab Investment Management 13F Portfolio

The biggest incremental bet is not a single stock, but a factor tilt: a huge move into Schwab U.S. Large-Cap Growth ETF (SCHG) alongside chunky adds in defensive blue chips. That tells you they want durable earnings growth with less single-name blow‑up risk.

On the stock side, the clearest conviction cluster is health care. They ramped Abbott up by 31.2% to $5.41B, Merck by 9.2% to $6.99B, Amgen by 17.7% to $5.44B, and Eli Lilly by 1.8% to $7.20B, all at solid gains vs cost but nowhere near the nosebleed multiples of front‑line AI.

Consumer defensives are the other leg of the stool. Home Depot is up 18.6% to $7.15B, Procter & Gamble 14.2% to $6.93B, and PepsiCo 19.5% to $4.89B, a coordinated bet on resilient US consumption but with balance‑sheet strength and pricing power. Verizon, lifted 13.1% to $5.41B, adds a high‑yield, bond‑like telecom cash stream to the mix.

Finally, they nudged up quality compounders and financial plumbing: Berkshire Hathaway, Visa, Mastercard and JPMorgan all saw share count increases, reinforcing a preference for diversified, fee‑rich, system‑critical franchises over more cyclical financial risk. The through‑line is clear: Schwab is paying up for cash flow visibility while letting cheap beta do more of the heavy lifting through SCHG.

If the buy tape screams “defensive growth,” the sell tape shows where Schwab found the cash. The heaviest funding source was its own small‑cap value sleeve: Schwab Fundamental US Small Company ETF (FNDA) was cut by 23.4% (about $1.60B), and the broad fundamental index FNDX was trimmed 10.6% (about $1.38B).

That’s a deliberate step away from deep value and small‑cap factor risk after a strong 3‑year run, not a micro call on any one stock. At the single‑name level, Texas Instruments was cut 18.3% (roughly $1.42B), Qualcomm 27.7% (about $1.58B), and Intel 5.6%, signalling a clear preference within semis for AI‑levered names and capital equipment over more mature, smartphone‑centric or PC‑exposed chipmakers.

UnitedHealth, despite being a top‑tier health care holding at $8.24B, was pared by 4.7%, likely a risk‑management move after strong performance and regulatory noise, while Tesla was shaved by 3.3%. In mega‑cap tech, trims to Apple, Amazon, Broadcom and tiny reductions in Nvidia and Microsoft look more like position‑size hygiene on enormous winners than any thesis reversal.

Taken together, the fund is compressing exposure to cyclical value, legacy communications chips and idiosyncratic headline risk, and recycling it into diversified growth baskets (SCHG) plus a broader array of health care and defensive cash‑flow names.

The sector bars show a portfolio that is still unapologetically tech‑led but slowly diversifying its return drivers. Technology eased from 46.94% to 45.35%, a small move in percentage terms but meaningful in dollars at this AUM scale.

Health care rose from 11.71% to 12.4%, powered by broad‑based adds to Abbott, Merck, Amgen, Lilly, Bristol‑Myers and even a modest build in Altria’s health‑care‑classified cash machine. That is Schwab explicitly buying regulated, cash‑generative earnings streams to sit opposite volatile AI and macro‑sensitive cyclicals.

Consumer sectors quietly gained influence. Discretionary ticked up to 9.82% with more Home Depot, Costco and Walmart; staples climbed to 3.07% via PepsiCo and Coca‑Cola. Telecom crept higher to 3.36%, driven by Verizon and Comcast, further thickening the portfolio’s quasi‑bond layer.

Energy inched up to 4.04% on adds to Chevron and ConocoPhillips, while trimming Exxon slightly — a modest affirmation of integrated oil’s role as an inflation and geopolitical hedge. Real‑estate‑labeled payments (Visa, Mastercard) and a steady 1.68% in financials via JPMorgan round out a book whose sector profile now looks more barbelled: AI‑and‑infra growth on one side, health care, staples, telecom and energy ballast on the other.

This quarter’s moves read as a manager preparing for more volatility without surrendering the upside from structural themes. The AI engine — Nvidia, Microsoft, Alphabet, Broadcom, AMD, Micron, Lam Research, Applied Materials — is intact, but they are no longer adding size there aggressively.

Instead, they’re using ETFs and diversified compounders to dial in the exposures they actually want: large‑cap growth via SCHG, quality financial and payments rails via JPMorgan, Visa, Mastercard, and a health‑care complex big enough to matter in portfolio‑level drawdowns. The message is that the next leg of performance should come from a mix of AI, earnings‑resilient drugs and staples, not from simply riding multiple expansion in the same handful of mega‑caps.

For observers, the key tell is how they funded this shift: out of small‑cap value, legacy comms chips and a thin layer of excess sizing in the biggest winners. Expect future quarters to refine that barbell rather than blow it up — nudging weights among semis, rotating inside health care, and flexing Schwab’s own ETFs to keep factor and duration risk in line with whatever macro backdrop shows up next.