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 slices of pizza that are half the size of six large slices.
So if stock splits mean nothing, why do companies do them? None of the reasons has anything to do with whether the stock is a good investment. The usual suspects:
- To make the stock look cheap.
- To increase liquidity.
- To meet stock exchange listing requirements.
- To express a bullish management attitude.
No matter what the reason, the market tends to view stock splits as positive, and a company's shares can get a short-term boost from the event. But if the business isn't a good, long-term company, it makes no difference if its shares split or whether you buy them before or after they do.
A split decision
That's why we pair stock-split announcements with judgments from the more than 75,000 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 (five being the top). 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, we take notice. We dive in to find out what the CAPS community has to say about some of these companies.
Here are four companies that have recently announced stock splits:
|
Company |
Split |
Date of |
Date |
CAPS |
|---|---|---|---|---|
|
Corus Entertainment |
2:1 |
Oct. 25, 2007 |
Feb. 1, 2008 |
***** |
|
Bolt Technology |
3:2 |
Nov. 20, 2007 |
Jan. 30, 2008 |
***** |
|
Carolina Trust Bank |
11:10 |
Nov. 15, 2007 |
Dec. 10, 2007 |
NR |
The two companies with five-star ratings are considered outstanding prospects -- five stars signal that investors are just as confident about their prospects as management apparently is. Yet as the market takes its toll on share prices, perhaps the need to split shares will decline as well.
A burst of energy
Seismic energy source developer Bolt Technologies has enjoyed the surge in demand for oil exploration. Its stock has doubled over the past year, even as it sits some 36% below its 52-week high. Knowing where to drill is gaining more and more importance, and improvements in technology to clarify seismic data has helped others in the space, like Dawson Geophysical
Bolt's airguns shoot seismic waves into the earth to detect variations that show potential places to find oil and gas. Earlier this year, top-rated CAPS All-Star ShuntSD felt that supplying the technology to help undersea exploration was an easy business to understand.
Simple industry play. Further exploration in the oceans require equipment and equipment in this industry doesn't have a long lifespan. They will have strong demand for their products and the company financials look good indicating capable management.
CAPS player kookiekoetter notes that the fall in share price makes this company particularly attractive now.
This stock has been a great performer until recently, so buying on weakness. The company is forecasting continued growth with no slow down in sight, so I'm guessing it's time get on board of this dynamic performer.
Split
the difference
How about you? Will investors continue to explore for profits here? Get in the mix with Motley Fool CAPS and share with tens of thousands of your fellow investors how you feel about these stock split stories.
