Are there advantages to buying stocks announcing splits?
Best Answer
2082 points
alanj answered one year ago …
A lot of times a split is an indication that the share price has been increasing (that is the advantage, the idea is that a stock that has been increasing will continue to increase), but is getting out of range for the smaller investor. So they do a split to attract more investors because they need more capital to expand the business because they're growing. That would be one reason.
One reason a reverse split might be done. Lets say a companies stock has lost value and is now $1 per share. The company may decide to do a reverse split of 10 to 1. So, now a share would be $10 per share. To the uninformed a share price of $10 looks to be healthier than a share price of $1. But there would be no difference in company value at the time of the split or reverse split.
Answers
130 points
HeyJuan answered one year ago …
Not really, but if a stock has been trading at an unusually high price it could be more attractive to the smaller investor.
For example, we might be more inclined to own google at $6.00 instead of $600 per share, but there would be no difference in the company's total value.
119 points
wiseone answered one year ago …
Yes, there are, but you have to be very precise in your timing. There are books on the subject and one famed advisor in this area recently had to cut the price of his course on the subject by about 90%!
Read more from wiseone
4085 points
EthanR answered one year ago …
There is often a run up in price before the split occurs, as everyone wants to be in the stock before it happens. Then, predictably after the split occurs, the stock will often sell off. The split itself is inconsequential. Owning 100 shares of a $50 stock is the same as owning 200 shares of a $25 stock.
Read more from EthanR678 points
BoxCar answered one year ago …
After the 1987 stk mkt crash I bought $500 of Harley Davidson, about 16 shares.
Over 20 yrs it split 5 times to 32, 64, 128, 256, then 512. When it split a 6th time
it was the 100th ann or 2003 so I sold it all off at $50/share for $50,000 or 100X
Point is, the split is not the point. Its the saw tooth gain of continued splits that matters
