Baidu Inc. (NASDAQ: BIDU), China’s leading internet search engine, is scheduled to execute a 10-for-1 stock split on its ADR shares on Wednesday. Another stock split comes soon after with Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) executing a 3-for-1 stock split on May 18. That raises the question whether other high priced stocks like Google Inc. (NASDAQ: GOOG), Apple Inc. (NASDAQ: AAPL), Intuitive Surgical Inc. (NASDAQ: ISRG), Priceline.com Inc. (NASDAQ: PCLN) or MasterCard Inc. (NYSE: MA) will follow suit.
Baidu (BIDU) is currently one of the most expensive stocks on the market. BIDU stock will split 10 for 1, bringing the stock’s lofty price of nearly $700 a share down to a digestible $70. Green Mountain Coffee (GMCR) will follow soon after with a 3 for 1 stock split, bringing shares down from around $75 to $25 a piece. This is after GMCR split 3-for-2 at almost the same time last year.
A stock split is usually executed by stocks that have seen shares soar so high that smaller investors have trouble buying in. Sometimes that’s more of a psychological issue than a pocketbook issue, since 1 share at $100 and 10 shares at $10 both deliver the same profit depending on a stock’s movement. But even though the underlying value of the company doesn’t change, some traders just prefer to buy in round lots or in large quantities. To hear some traders tell it, a stock split is more of a marketing ploy than anything else.
It’s also worth noting that stocks sometimes see a bounce after such a split, since many investors think the company is more affordable now that the high price tag is gone – even though the fundamentals of the company have not changed. Others assume that the company is pushing share prices down because it expects to see long-term growth.
So which companies will be next to offer up stock splits? Natural candidates are Google Inc. (GOOG) and Apple Inc. (AAPL), which have seen soaring prices for several years. Neither of these companies have had trouble convincing investors to jump in, but as we saw with Berkshire Hathaway Inc. (NYSE: BRK.B) and its massive 50 to 1 split of it’s Baby B shares, even great companies can benefit from such a move. Berkshire B stock shares are up 18% YTD, and surely part of that can be attributed to the split. GOOG stock is trading for around $520 a share, and AAPL stock is around $250 a share.
Other pricey stocks include Intuitive Surgical (ISRG), Priceline.com (PCLN) and MasterCard (MA). ISRG stock is trading around $320 a share, PCLN stock is around $240 and MA stock is around $230. There are no plans as of yet for these stocks to split, but they are some of the largest blue chip stocks to trade over $200 a share.
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