Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Google Needs to Split

Here we go again.

At the start of the year, Google (Nasdaq: GOOG  ) touched $500 a share, and then it dropped back to the mid-$400s for a while. When the price returned to $500 a share, it was to a hue and cry from doomsayers, predicting that it, too, shall pass. Then came $600. Well, yesterday the shares broke the $700 mark.

The online mammoth is already floating in rarefied air -- only four other American stocks that trade on the NYSE and the Nasdaq stock exchange have share prices above $600 apiece. That's the A-B punch of Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) , which is in a league of its own, followed by Washington Post (NYSE: WPO  ) at $817 right now, and Chicago Mercantile Exchange owner CME Group (NYSE: CME  ) , which trades for $656 a share.

If Google puts together another few years of outstanding growth and fair-to-generous valuation, the share price will be too rich for individual investors. The big institutions and wealthy standalone buyers don't care whether one share costs $50 or $5,000, but tell that to a young jester who is just starting on a career path and wants to invest his or her first $1,000.

Berkshire's Warren Buffett is very clear on his aversion to splits, and CME CEO Craig Donohue says, "About 70 percent of our shareholders are institutional, so the idea of reaching a retail audience is probably not very applicable in our case." That's fine for large, traditional businesses like a mercantile exchange, a publisher, or Buffett's every-market conglomerate, but is that what Google thinks about its owners?

There's been a certain blue-collar je ne sais quoi in Mountain View from day one, when the search service ran on borrowed hardware in a Stanford garage. The famous "don't be evil" credo is another nod to common decency, and it just doesn't jibe with the big G's image to shun the individual investor like that.

A split is a non-event unless the current price keeps shares out of your budget reach. More than 2,000 stocks on the NYSE and the Nasdaq exchange have split at least once since 1995. If Cisco (Nasdaq: CSCO  ) hadn't divvied up its shares into one-eighteenth of what they were in 1995, its shares would cost more than $585 each today. Dell (Nasdaq: DELL  ) has split one share into 64 over the same time. Those shares would cost $1,950 if there had been no splits.

There's a time and a place for everything -- even stock splits.

Split hairs, not stocks:

Read/Post Comments (0) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 539559, ~/Articles/ArticleHandler.aspx, 10/21/2016 9:54:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 38 minutes ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
GOOGL $824.06 Up +2.43 +0.30%
Alphabet (A shares… CAPS Rating: *****
BRK-A $215600.00 Down -1375.00 -0.63%
Berkshire Hathaway… CAPS Rating: *****
BRK-B $143.60 Down -0.89 -0.62%
Berkshire Hathaway… CAPS Rating: *****
CSCO $30.15 Down -0.01 -0.03%
Cisco Systems CAPS Rating: ****
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
GHC $468.94 Up +4.91 +1.06%
Graham Holdings CAPS Rating: ***