invest in stocks that split
TRANSCRIPT
Invest in Stocks That Split
By www.ProfitableInvestingTips.com
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Stock splits are supposed to give you two shares instead of one but not necessarily increase the value of your investment.
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Many companies like to see their stock trade within a certain range.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
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Before We Continue…
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
So, when the stock goes up a bit they split the stock.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
The surprising thing is that stocks that split seem to do better on the average than stocks that don’t.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
So, should you invest in stocks that split? USA Today says that the reason investors love stock splits is mostly a matter of psychology.
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Stock splits might be one of the last corners of the market where emotion seems to trump logic.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
There’s absolutely no quantitative difference between owning 100 shares of a $20-a-share stock and 200 shares of a $10-a-share one following a 2-for-1 split.
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Yet, there have been 41 stock splits by companies in the Standard & Poor’s 500 over the past three years.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
These stocks are up an average of 33% from the time they split to Wednesday’s close – topping the Standard & Poor’s 500’s average gain of 23.6% during the same time.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
That means holding all the companies’ shares that have split – on average – has been a winning strategy.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Why is this? Is it all perception? Here are two thoughts that come to mind.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Certain types of investors like certain stocks and they like them at a certain price.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
If you have $5,000 to invest every quarter and you would like to buy 100 shares you might decide to stock with your regular $50 a share stock.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
If the stock climbs to $85 a share and then splits you can get your 100 shares for $4,250 and will be happy.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
There may well be people for whom this approach works.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Evidence of Success
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Growth stocks run the risk of being overpriced.
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If Microsoft had never split it would be trading for tens of thousands of dollars a share today.
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Splitting the stock keeps the price where an investor can pick of a few shares within his price range.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
And, if a company splits their shares every few years it is because they are growing.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Stock splits over time are evidence of success.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
NASDAQ talks about how to identify growth stocks.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Many investors attempt to find growth stocks, but how does an individual investor seek out and identify the best and brightest growth stocks for their portfolio?
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A savoy investor looks for specific fundamental characteristics to unearth these companies.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
First, growth traders look for companies that are expected to grow at an above average rate, corresponding to the market as a whole.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Further, analysts look for better than average cash flows, earnings, and or revenue growth.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
When you invest in stocks that split routinely you are investing in stocks with stable and steady growth.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Growth and Value
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The Motley Fool asks if a growth stock can be a value stock.
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Can a growth stock simultaneously be a value stock?
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
The answer to this question is yes – though, it’s an uncommon occurrence.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Normally growth stocks trade at premium valuations indicative of their growth rate.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
However, once in a blue moon, a growth stock comes along that also has a relatively low P/E and PEG ratio (a measure of future revenue growth relative to P/E), qualifying it as a value stock as well.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
They give three examples, Gilead Sciences, 3D Systems and Apple.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
Apple does not generally split its stock but it may eventually have to.
http://profitableinvestingtips.com/stock-investing-tips/invest-in-stocks-that-split
The point is that when you invest in stocks that split you are investing in growth and value.