5 Stocks Splitting Shares

As Fools, we know the value of a stock split: zero. It's a non-event. Instead of a $20 bill in your wallet, you've now got two $10 bills. You're eating 12 smaller slices of your pizza, instead of six larger ones.

So if stock splits mean nothing, why do companies do them? A few reasons, really, none of which has anything to do with whether the stock is a good investment:

  • To make it look cheap
  • To increase liquidity
  • To meet stock-exchange listing requirements
  • To express a bullish management sentiment

Regardless of the reason, the market tends to view stock splits as positive events, and a company's shares can get a short-term boost from the news. If the business isn't a good, long-term company, it doesn't matter if its shares split, or whether you buy them before or after.

A split decision
That's why we pair up stock-split announcements with the sentiments of the 65,000 investors at Motley Fool CAPS. Every day, professional and novice investors rate the prospects of thousands of stocks, resulting in a rating between one and five stars (five being the best). If the best stock-pickers think a company's long-term performance is outstanding, and the company has announced the bullish signal to split its shares, perhaps investors should take notice.

Then we dive in and see what exactly the CAPS community has to say about some of these companies. Here's a list of stocks that have recently announced stock splits.

Company

Split

Announcement Date

Date Payable

CAPS Rating (out of 5)

Monro Muffler (NASDAQ:MNRO)

3:2

8/22/2007

10/1/2007

**

Rush Enterprises (NASDAQ:RUSHA)

3:2

9/20/2007

10/20/2007

*****

Arena Resources (NYSE:ARD)

2:1

9/20/2007

10/26/2007

****

Paccar (NASDAQ:PCAR)

3:2

9/11/2007

10/9/2007

****

Denbury Resources (NYSE:DNR)

2:1

9/25/2007

12/5/2007

****

Source: Company SEC filings. Ratings courtesy of Motley Fool CAPS.

This is a pretty well-thought-of group of companies (with the exception of auto repair shop Monro Muffler, which only garners a below-average two-star rating), and CAPS players seem to be as confident about their prospects as management apparently is.

Divided sentiment
While some fairly diverse industries are represented here, let's look specifically at the top-rated Rush Enterprises, which operates a network of truck dealerships. Why are CAPS investors hot for this stock, when trucking has been a lagging industry? The Dow Jones Trucking Index has only returned 6% for the past year. Compare that with the top-performing tire makers like Goodyear (NYSE: GT  ) , whose stock has more than doubled.

It seems like "everyone" knows that railroads will soon be the dominant form of transportation, which is why even Warren Buffett's Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) has been expanding ties to railroad stocks and not trucking companies.

Maybe so, but CAPS All-Stars have been drawn to Rush. Fully one-third of the investors who have rated the truck dealer are All-Stars (players with ratings higher than 80), and they see the company as a stellar performer. In fact, there are no bears on Rush Enterprises. Take jagad5, with a 95.88 player rating. He sees Rush trucks everywhere:

I drive around the Midwest quite a bit and I have been seeing more and more Rush trucks on the road (not a lot but a noticeable increase.) The company sells trucks and parts to an industry that can't not keep moving. Revenues and income are growing 40%+ over the last 4 years, with no reason to believe that they will grind to a halt. The current price reflects a company with prospects of growing only 2%. That's not likely.

That's a view echoed by another All-Star, Spooky27, who has performed better than 91.76% of all CAPS players:

This is North America's largest network of heavy-and medium duty truck dealerships. It's a one stop shop! Great company thats very well respected! it's estimated eps growth rate is around 21% estimated equity growth rate is around 17% estimated sales growth rate is around 21% my prediction is at this rate in 5 years from now they could easily be at 65.00 a share! So watch this stock!

Split the difference
How about you? Will Rush keep on truckin'? Get in the mix with Motley Fool CAPS and tell tens of thousands of your fellow investors how you feel about these stock split stories.


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