by Marc Bastow | June 12, 2012 5:00 am
What ever happened to the go-go ’90s?
You remember those frothy, heady days? Stock markets were roaring, companies were growing like gangbusters, new product introductions streamed into the marketplace … and companies split their stock to allow for all that growth and to spread the prosperity. In fact, in 1997, 102 companies in the S&P 500 split their stock.
It appears those days ended in the early 2000s, and they’re not in any danger of coming back anytime soon. Indeed, the four most recent “high-profile” splits, Coca-Cola (NYSE:KO), Dollar Tree (NASDAQ:DLTR), Google (NASDAQ:GOOG) and most recently Under Armour (NYSE:UA) are almost an anomaly. Last year, a mere 16 companies announced stock splits.
With high-flying stock prices attached to Apple (NASDAQ:AAPL, $575), Amazon (NASDAQ:AMZN, $225), Priceline (NASDAQ:PCLN, $650) and Chipotle (NYSE:CMG, $400), investors are scratching their heads, wondering “What gives?”
Well, I can think of at least three reasons why stock splits were all the rage back in the day, and how the mentality of those days works against the investors of today:
But looking a little closer through the 1990s shows the (split) pool wasn’t really that deep. Looking at a handful of Dow stocks shows that, rather than a flood of splits, it was more like a trickle:
|Stock||Ticker||Number of splitS|
|Johnson & Johnson||JNJ||2|
So who was making the stock split noise that made the headlines in the ’90s? Tech companies, and it’s that legacy that perhaps colors the new high-flyers.
Here is a (short) list of tech high-flyers — who, by the way, still are alive and more than kicking — that made stock-split news in the 1990s:
|Stock||Ticker||Number of splits|
Companies with high-priced stocks are now loath to approve share splits, and while no single theory serves to explain why, I think there’s several reasons:
Of course, the fallout from at least some of this is that market volume is at a 10-year low, according to Bloomberg, and the trickle-down effect can be found in brokerage houses. Daily trading volume on all U.S. exchanges has fallen nearly 33% since 2008.
But don’t hold your breath waiting for a change of heart from eager CEOs hoping to make the retail investor happy.
If recent history is any guide, it just isn’t going to happen.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long XOM, MSFT, INTC and JNJ.
Source URL: http://investorplace.com/2012/06/the-stock-split-blues-ko-goog-dltr-aapl-amzn-pcln/
Short URL: http://invstplc.com/1fsoEAI
Copyright ©2015 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.