4 Stock Splits That Need to Happen

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Remember when stock splits were cool?

As growth stock prices crept past $50, the companies would fire out 2-for-1 or even 3-for-2 stock splits to bring its share price down to a more manageable level. If Wall Street had a time capsule for the 1990s, you'd probably find a lot of those split announcements.

Traditional stock splits are rarer these days, making yesterday's move by Whole Foods Market (NASDAQ: WFM  ) a rare sight. After another blowout quarter the leading organic grocery store operator will execute a 2-for-1 stock split.

It's a zero-sum game. The stock price will be cut in half. The number of shares outstanding will double. However, in the past, stock splits have been interpreted favorably by the investing community. They are seen as a sign that the company believes that the stock is heading higher in the near future so it may as well contract the share price to attract investors that falsely assume that a high share price means that a stock is expensive.

The rise and fall of stock splits
Stock splits aren't as necessary these days. Investors have it easier than ever if they don't want to buy a stock in round lots of 100 shares.

However, with so many stocks already in the triple digits and inching higher, it wouldn't hurt to have a few stocks wax nostalgic and show that this isn't just a race to $1,000.

Let's go over a few stocks that are ripe for a stock split.

  • Google (NASDAQ: GOOGL  ) : It's clear that the world's leading search engine has never cared to play the stock split game. It originally wanted to go public at $135, but settled for $85 andt never looked back. Google would've had a stock split before its IPO if it ever wanted to come off as cheap chic. Google hit another fresh high today, and it's 14% away from $1,000. It won't go for a split before then, but it may want to consider doing so after it hits 1k so it doesn't have to deal with negative headlines when it inevitably slips below $1,000 (ideally temporarily).
  • Apple (NASDAQ: AAPL  ) : If Apple didn't go for a split last year when its stock was trading for more than $700, it's not likely to make a go for it now that it's below $500. However, it was a serial stock splitter in its early years. Apple declared 2-for-1 stock splits in 1987, 2000, and 2005 when its stock was trading in the high double digits. It would probably send a confident message -- bringing back the swagger that it seems to have lost in recent months -- if it went for a 10-for-1 stock split here.
  • (NASDAQ: PCLN  ) : The "name your own price" travel portal reports tomorrow, so there's always a chance that it will announce a stock split if we get another blowout report. There's no reason for Priceline to defend this high-priced turf. All of its rivals are trading in the single and double digits. It would also be poetic to see a company that embarrassingly declared a 1-for-6 reverse stock split when the dot-com bubble popped a decade ago.
  • Intuitive Surgical (NASDAQ: ISRG  ) : The company that is revolutionizing common surgical procedures with its da Vinci robotic arm platform has seen its stock stall in the mid triple digits. Despite healthy growth, the shares have actually declined slightly over the past year. Are investors staying away because the share price is so high? The valuation has always been a bit steep, but the chunky share price may be keeping growth stock investors away by making it seem as if they missed their chance to buy in during the company's early growth stages.

Splits the uprights
After seeing Whole Foods Market soar on the heels of its stock split declaration, maybe the 1990s are coming back.

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Comments from our Foolish Readers

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  • Report this Comment On May 08, 2013, at 6:54 PM, garysund wrote:

    I think in the case of Apple stock a split would be a very good thing. This is a company that is so well known and has products that are used and loved by so many. Yet when I discuss owning the stock to people they just feel it is too expensive. This of course is not the case and seasoned investors know this. But think of the small investor. Even a student who is interested in starting to own stocks. A share of a stock that is moving close to a $500 a share price may seem over the top or even unreachable. Bring that same stock down to below $50 and you have a whole new market of investors who will grab a few shares. The small guy can feel like they can own a piece of the pie of a company that they love and own the products . Disney has done this. They have has so many splits in the past to keep the price down for the small investor. It is a great incentive and it works as great PR for the company.

  • Report this Comment On May 09, 2013, at 4:29 PM, Joemit wrote:

    Apple must have a stock split. The small investor who wants to steadily build up a holding via regular investments may not be able to afford 5-700 per share but is able to buy 2-3 shares at 50-60 dollars per share

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