Splitting Hairs with These Two Stocks

Fools know the value of a stock split: zero. It's a non-event. Instead of a $20 bill in your wallet, you now have two $10 bills. So, if they mean nothing, why 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, though, markets tend to view splits as positive events, and a company's shares can get a short-term boost from the news. But if the company isn't a good, long-term business, it doesn't matter if its shares split, or whether you buy them before or after.

That's why we pair up stock-split announcements with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think a company's long-term potential is outstanding, and the company is giving off bullish signals, maybe then investors should take notice.

Here are two stocks that recently split their shares or announced their intention to do so.

Source: Online Investor.

Don't blindly buy into a split -- you still need to do some research. Use the announcement as a jumping-off point to determine whether its shares are two or three times as good as before.

Digging for riches
Mining and construction operations kick up a lot of dust, particulate that can clog engines and cause them to grind to a halt. Donaldson Company makes filtration systems that prevent engines like those from Caterpillar (NYSE: CAT) from seizing up. It counts the heavy equipment manufacturer as one of its top customers, generating just under 10% of total revenues, so it's easy to see the immediate future for Donaldson as pretty bright.

Caterpillar recently reported profits jumped 60% last quarter, and it was expecting the global economy to grow 3.3% this year, much more than the 2.8% increase it achieved in 2011. Pent-up demand is waiting to be released, with capital spending at the mining industry's top players forecast to jump 25% this year. They'll be buying a lot of Cat's equipment, which will translate into larger sales for Donaldson.

Donaldson's stock is trading at some of its highest levels in the company's history, and the split represents the fifth time in the past 20 years it has split its shares. Concurrent with the split, Donaldson also hiked its dividend 7%, and this marks 26 consecutive years it has boosted the payout. CAPS member chopchop0 is only slightly concerned he's recommending the shares at such lofty levels.

Solid company niche field = moat I may be buying this a bit high, but will wait for a pullback to buy IRL.

Add the filtration specialist to your Watchlist and give us your opinion of its prospects on the Donaldson Company CAPS page.

Feeling gassy
Growth trends look equally promising for ONEOK, a natural gas transportation and storage leader. The mild winter we've enjoyed is keeping natural gas inventories at record-low levels and pricing depressed. Unless there's a blistering cold snap soon, oil traders won't see much improvement in the nat gas market anytime soon, yet the drilling companies continue to pump out ever more product despite declining rig counts.

The Energy Information Administration says there is more than 2,700 billion cubic feet of gas in storage, down slightly from last week, but above the year ago period and much higher than the five year average. Prices hover around $2.50 per million BTUs, a third lower than where prices were a year ago.

Investing in oil and gas storage and transmission facilities is the picks-and-shovels investment equivalent of the 1849 gold rush. Getting it from where it's drilled to where it will be stored will ultimately benefit ONEOK, Niska Gas Storage Partners, and Energy Transfer Partners as more capacity is brought online.

That could be why 97% of the 417 CAPS members rating ONEOK think it will beat the broad market indexes. Add the storage specialist to the Fool's free portfolio tracker to keep up to date on when the cuts in rig counts finally makes an impact on inventory.

Split the difference
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. Then check out this special report from The Motley Fool, which found two companies that don't need foundation and makeup to change the face of retail. "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail" highlights two more retailers actually growing revenue despite difficult times.