Fools know the value of a stock split: zero. It's a nonevent. Instead of a $20 bill in your wallet, you've now got 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 the more than 70,000 investors at 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. 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

Date Payable

CAPS Rating

Actuant (NYSE:ATU)

2:1

10/18/2007

11/8/2007

*****

Met-Pro (NYSE:MPR)

4:3

10/18/2007

11/14/2007

****

Rollins (NYSE:ROL)

3:2

10/23/2007

12/10/2007

****

Kennametal (NYSE:KMT)

2:1

10/24/2007

12/18/2007

****

Twin Disc (NASDAQ:TWIN)

2:1

10/23/2007

12/31/2007

*****

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

This is a pretty well-liked group of companies, with all of them rating four or five stars, a signal investors are just as confident about their prospects as management appears to be.

Undivided attention
It's a hole big enough to drive a truck through. The gap between the price that system actuation maker Actuant started trading at when it was spun off and what the market currently prices it at has widened at an average growth rate of 35% annually. The Motley Fool Hidden Gems recommendation began trading at $7.65 a share and now fetches around $66 a stub. That's a phenomenal performance no matter how you look at it, and management seems to suggest by its stock-split announcement that it remains bullish about its future.

Actuant has attracted a bevy of top players on CAPS -- in fact almost 45% of the investors rating the company carry the All-Star tag. They're enamored of the niche that it has carved out for itself, one that's not easily replicated. For example, Somnambulo, with a 95.54 player rating, says it offers "unsexy but necessary" products.

"Supplies and Engineered Solutions" is an insufficient description. They make tools, hydraulic stuff, terminals, transformers, LEDs, monitors -- all kinds of stuff that is needed. That's why retail is so much harder -- you don't need to buy that shirt at Gap, but the things sold by a company like this are unsexy but necessary. They do have a lot of debt. But ROE looks good, lots of institutional investment ... moderate shorting ... I think [it's] an OK pick long term.

For a similar reason, you'll find simplylearning backing Actuant.

Have you seen the list of stuff these guys sell! It is incredible and there are not very many alternatives to their products. Financials are solid, highest growth in [the] industry, blah, blah, blah.

smith972 raises a note of caution.

Demand will increase and management will be aggressive to fill that gap. It does concern me that management does not own much of their own company but I think this company will do well in the next 5 years.

High insider ownership is, in fact, one of the criteria Tom Gardner looks for when selecting the next home run stock at Motley Fool Hidden Gems, but it's not a deal breaker. Seems the All-Stars agree.

Split the difference
How about you? Will Actuant actually keep driving for profits? Get in the mix with CAPS and share with tens of thousands of your fellow investors how you feel about these stock-split stories.

Take Hidden Gems into your den for 30 days, absolutely free, and see what it can do for you. It includes free access to past issues.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a pretty slick disclosure policy.