Return of Retail Investors Boon for Brokers

NEW YORK (TheStreet) -- Retail investors are jumping back into the stock market, a bullish sign for both the online brokers as well as banks providing trading services.

Household net worth increased by 4% in the second quarter, following six straight quarters of contraction, according to a report from JMP Securities that draws on Federal Reserve data. Investors also upped their allocation to equities relative to cash and bonds, JMP's report states.

JMP analyst Michael Hecht highlights The Charles Schwab Corporation (SCHW Quote) as the best way to take advantage of the trend. He has a $23 target price on Schwab, which he calls a "best in class asset gatherer."

Hecht has his reservations about E*Trade (ETFC Quote), as he noted in a recent interview with TheStreet.com . Still, a resurgent retail investor can only help E*Trade, as well as other online brokers like OptionsExpress Holdings (OXPS Quote) TradeStation Group (TRAD Quote) and TD Ameritrade (AMTD Quote). Last week, a number of online brokers reported jumps in trading activity for August, including E-Trade, where daily average revenue trades, or DARTs, totaled 208,495, an increase of 18.3% on a sequential basis, and 37.4% from last year's equivalent level. E-Trade also said that, as of Sept. 11, DARTs were already above 200,000 for the month to date.

Raymond James Financial (RJF Quote) also ought to benefit from more aggressiveness on the part of its retail clients. A report from Sandler O'Neill notes Raymond James saw client assets increase by more than 3% in August, while securities commissions and fees were up 5% from July. Sandler nonetheless maintains a "Hold" rating on Raymond James.

Morgan Stanley(MS Quote) and Bank of America (BAC Quote), with their giant brokerage forces, will also benefit if the return of the retail investor is for real. So will General Electric (GE Quote), which remains a popular retail stock despite a controversial decision to cut its dividend earlier this year.