For more than three decades, investors have consistently had a next-big-thing technology or trend to captivate their attention and wallets. For instance, artificial intelligence (AI) has been a driving force for Wall Street's major stock indexes for almost three years.
But more than one market-driving trend can exist at the same time. In addition to excitement surrounding AI, investors have been enamored with top-tier businesses announcing and completing stock splits in recent years.
A stock split is an event that allows a publicly traded company to superficially alter its share price and outstanding share count by the same magnitude. These changes are superficial in the sense that they don't affect a company's market cap or in any way affect its operating performance.
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Although a stock split can move a company's share price higher or lower, there's a titanic difference as to how investors view these actions. Reverse splits, which are aimed at increasing a company's share price, are often viewed negatively. This is the type of split usually undertaken by struggling businesses that are attempting to avoid delisting from a major stock exchange.
Conversely, investors have traditionally lined up to buy shares of businesses announcing and completing forward splits. This variety of split lowers the share price to make it more nominally affordable for retail investors who can't purchase fractional shares through their broker. If a company's stock got to the point where a forward split became necessary, it's usually doing something right.
In 2025, only a handful of primetime businesses have announced and completed forward stock splits. One of these stock-split stocks, which has gained almost 62,000% since its public debut, remains a phenomenal buy for optimistic, long-term investors, while another is rife with red flags and absolutely worth avoiding in August.
The magnificent stock-split stock that can be bought with confidence in August: O'Reilly Automotive
While 2024 was highlighted by a number of AI-related tech stocks splitting their shares, this year has been all about non-tech companies taking the plunge. Even though its stock is currently trading at a bit of a historical premium, auto parts chain O'Reilly Automotive (ORLY 0.81%) makes for a no-brainer buy in August.
Though it wasn't the first influential company to complete a stock split in 2025, O'Reilly was the first major business to announce a split. In March, its board proposed a 15-for-1 forward split, which shareholders approved in mid-May. After the close of trading on June 9, O'Reilly's split went into effect and reduced its stock from close to $1,400 per share to around $90.
Before digging into the company-specific factors that make O'Reilly such a magnificent stock to own, it's important to touch on the broader themes that have fueled its growth. For example, the latest report from S&P Global Mobility found the average age of cars and light trucks on U.S. roadways reached an all-time high of 12.8 years in 2025. Consumers are hanging on to their vehicles longer than ever, and that means auto parts suppliers will be counted on to keep these vehicles running smoothly.
To add to that, the Federal Reserve's aggressive interest rate increases to combat historically high inflation in 2022-2023 sent auto loan interest rates soaring. Higher loan expenses, coupled with tariff-related uncertainty, offer additional reasons for drivers to hang on to their vehicles even longer.
One of the company-specific factors that makes O'Reilly Automotive so special is its distribution network. Its hub-and-spoke distribution model features 31 distribution centers and around 400 hub stores. This setup ensures that hub stores can get more than 153,000 stock keeping units to outlet stores on a same-day or overnight basis. Keeping mechanics and consumers happy by having the parts they need within reach at all times is at the heart of what makes O'Reilly a great company.
But perhaps the most impressive thing about O'Reilly Automotive, from an investment standpoint, has been its capital-return program. Since its share-repurchase program was initiated in January 2011, $26.59 billion has been spent to retire nearly 60% of its outstanding shares. With the company's net income steadily climbing over time, this buyback program has had a decisively positive impact on its earnings per share (EPS).
Although O'Reilly Automotive's forward price-to-earnings (P/E) ratio of 30 represents a 29% premium to its trailing-five-year average forward P/E ratio, it has all the right puzzle pieces in place to deliver sustained high-single-digit, if not low-double-digit, annual EPS growth.
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The stock-split stock investors should completely avoid in August: Regencell Bioscience Holdings
While most stock-split stocks offer a rich history of sustained outperformance, companies completing forward splits are by no means universally good deals. In August (and well beyond), an extremely strong case can be made to completely avoid clinical-stage healthcare company Regencell Bioscience Holdings (RGC -1.14%).
Regencell landed squarely on the radars of investors in May when it began a truly jaw-dropping run-up of more than 60,000% on a year-to-date basis. This culminated in Regencell's completion of a 38-for-1 forward split after the closing bell on June 17. Though this split was designed to reduce the company's share price from $595 to about $15.65 per share, Regencell stock skyrocketed to more than $83 per share on an intraday basis following its split.
While momentum trading has clearly worked in Regencell's favor, there are a number of reasons for investors to shy away from this stock.
Topping the list is the fact that Regencell, a developer of traditional Chinese medicine (TCM), hasn't generated a penny in revenue and isn't particularly close to commercializing any of its proposed therapies. Though it's not losing an eye-popping amount of money, it's nevertheless inexplicable that this company is lugging around a market cap north of $7 billion with absolutely no clarity as to when recurring revenue will kick in.
Secondly, Regencell's risk factors section is a mile long and a minefield of red flags. In particular, the company warns that it's never completed a large-scale clinical trial before, and there are no guarantees that it can protect its TCM intellectual property that isn't covered by patents from being divulged by its employees.
Building on this point, Regencell is operating under a going concern warning. In simple terms, the company's assets appear to be insufficient to cover its current liabilities over the coming 12 months, based on Regencell's 2024 annual report. While it's not uncommon for clinical-stage drug developers to operate under a going concern warning, it signals that a potentially dilutive capital raise may be in the offing.
The other factor to consider is that insiders holding a large percentage of shares helped propel Regencell Bioscience stock higher in May and June. In other words, it was probably a small tradable float that allowed its shares to be sent to the moon. Following its 38-for-1 forward split, there are considerably more tradable shares, which makes a repeat event less likely.
Despite retracing more than 80% from its all-time high, Regencell stock could easily plunge another 90%.
