Fools know the value of a stock split: zero. It's a nonevent. Instead of a $20 bill in your wallet, you now have 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? There are a few reasons, none of which has anything to do with whether the stock is a good investment. Here are the usual ones:

  • To make the stock 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. But 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 more than 115,000 members of 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). Data shows that newly minted five-star stocks offer the best opportunities for investors, while the lowest-rated companies fared worst. 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, maybe investors should take notice.

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

Company

Split

Announcement Date

Payable Date

CAPS Rating (5 Max)

Alexion Pharmaceuticals (NASDAQ:ALXN)

2:1

7/29/2008

8/22/2008

****

Synaptics (NASDAQ:SYNA)

3:2

7/31/2008

8/29/2008

****

Integral Systems

2:1

8/13/2008

9/5/2008

****

Activision Blizzard (NASDAQ:ATVI)

2:1

7/11/2008

9/5/2008

*****

NA Galvanizing (NYSE:NGA)

4:3

8/21/2008

9/14/2008

****

Illumina (NASDAQ:ILMN)

2:1

7/22/2008

9/22/2008

****

Graham (NYSE:GHM)

2:1

7/31/2008

10/6/2008

*****

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

These companies are apparently well-liked by investors, as indicated by their CAPS ratings of four stars or better. Those high ratings are a signal that our CAPS community is just as confident about the companies' prospects as management apparently is. Yet as the market takes its toll on share prices, the need to split shares may decline as well, causing a dearth of split announcements -- just as we've seen over the past few months.

Splitting hairs
This is the second time in less than a year that vacuum and heat-transfer systems specialist Graham is splitting its shares, which have been on a tear. They've doubled in price since the beginning of the year, and they've more than tripled from their low point at the end of January. Top-rated CAPS All-Star member ChrisGraley sees the company continuing its forward momentum so long as there is demand for oil. Petrochemical companies are some of Graham's top customers.

Unless demand for oil gets cut in half, it's a play for the next decade. Don't confuse the price of oil with the demand for oil. Oil prices are gonna have wild swings depending on oil news, but in the last 2 years, the demand curve has been trending about the same as it was the 3 previous years and it's trending upward more every day. Supply has been trending up almost as quickly but hasn't kept up recently.

One of the few things seemingly unaffected by the recession has been game stocks like Activision Blizzard and fellow Stock Advisor recommendation GameStop (NYSE:GME). CAPS member doorusey looks at the lineup of games coming forth soon and finds the prospects for growth drool-worthy. In particular, the World of Warcraft title should be a game-changer for Activision.

The second World of Warcraft Expansion pack is set to release within a year. Currently, this video game has a base of approximately 10 million subscribers. As with most all of Blizzard's expansion packs, the vast majority of active players will purchase this new product. People were wowed by the success of Grand Theft Auto 4. Well this expansion will most definitely meet the level of sales that is achieved by most full fledged video games.

Split the difference
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Why not head over to the completely free CAPS service and let us hear what you've got to say about these or any other stocks that you think we should split hairs over?

Illumina, GameStop, and Activision Blizzard are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey owns shares of GameStop but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a red-hot disclosure policy.