7 Stock Splits Investors Are Dying to See

Stock splits don't change a thing about these companies, but they can provide a much-needed shift in sentiment

The Potential Chipotle Stock Rebound Is All About Brian Niccol

Source: Mike Mozart Via Flickr

About a week ago, consumer products giant Church & Dwight Co., Inc. (NYSE:CHD) just split its stock 2-for-1 from about $100 to $50 a share.

If you noticed this, you may be asking yourself, “Why do stocks split, and was the move good for CHD stock holders?”

The answer is tricky. Stock splits don’t change anything about the underlying business itself — revenue, profits, debt service, whatever. However, they do offer a cosmetic change that may make the stock appear to be more interesting to some investors through a trick of psychology.

Heck, if changing the shape and color of a plate can trick your brain into thinking food is tastier than it is, then certainly a smaller share price and trick your brain into thinking a stock is “cheaper” than it was a week ago.

I try not to moralize too much about whether these things are smoke and mirrors; as an investor, the most important part is simply to find good companies with a chance of delivering a profit from here.

I’ve broken down seven high-priced stocks that have potential, and identified the best investments with the potential to benefit from a split — if for nothing else other than an overdue need for a shift in sentiment.

Here they are, with some old favorites in tech on the list as well as some lesser-known names you probably have never heard of:

7 Stock Splits Investors Are Dying to See: NVR, Inc. (NVR)

7 Stock Splits Investors Are Dying to See: NVR, Inc. (NVR)
Source: Ryan Homes

Industry: Residential construction
YTD Performance: +1% vs. +4% for the S&P 500
Share Price: ~$1,650
Split Potential: 16-for-1 to ~$100

That is not a typo for NVR, Inc. (NYSE:NVR). This $6.5 billion homebuilder is one of the most expensive stocks in the market, and is long overdue for a stock split.

However, it’s worth noting that its high price and low volume may have kept out speculators, and thus provided stability even as other peers suffered. Consider that shares are up 150% since the beginning of 2007 before the housing crisis struck, while the S&P 500 is up only 50% and the SPDR S&P Homebuilders ETF (NYSEARCA:XHB) is down 8% in the same period.

Amid a robust housing market right now, the timing is right for making NVR stock accessible to new investors.

7 Stock Splits Investors Are Dying to See: Chipotle (CMG)

Industry: Restaurants
YTD Performance: -12%
Share Price: ~$420
Split Potential: 7-for-1 to ~$60

Chipotle Mexican Grill Inc. (NYSE:CMG) has seen its share price slashed almost in half from its 2015 highs thanks to an unfortunate spiral of food-borne illnesses and declining sales. Case in point: a same-store sales decline of 19% last quarter.

A stock split would be a way to change the narrative — and frankly, with a mature operation and more than 2,000 locations open, it’s time to start thinking about a new corporate strategy instead of the old high-growth model.

Splitting its share price 7-for-1 would be a good sign to investors that CMG stock is thinking differently.

7 Stock Splits Investors Are Dying to See: Markel (MKL)

Industry: Insurance
YTD Performance: +5%
Share Price: ~$920
Split Potential: 10-for-1 to ~$92

Never heard of $13 billion insurer Markel Corporation (NYSE:MKL)? Well, you’re not alone. Not only is the insurance underwriting business rather boring, but the company also boasts an anemic volume of just around 25,000 shares daily thanks to its sky-high share price, limiting activity.

Of course, that hasn’t been a problem for MKL stock, which has soared 140% in the last five years versus only about 85% for the S&P 500 in the same period.

A stock split could bring some much-deserved attention to this strong investment right now.

7 Stock Splits Investors Are Dying to See: Facebook (FB)

Industry: Social media
YTD Performance: +21%
Share Price: ~$125
Split Potential: 3-for-1 to ~$40

Facebook Inc (NASDAQ:FB) is one of my absolute favorite investments right now because of its impressive growth, impressive scale and bold leadership. I have a lot of faith in the company appreciating long-term, and that’s just one reason why a 3-for-1 stock split right now would be a good idea before pricing runs away from this social media giant.

The bigger reason, however, is that Facebook has already shown a penchant for making stock-based deals for companies — including $700 million in stock as part of the $1 billion deal for Instagram.

More shares means more potential for deals like this, particularly if a FB stock split is structured in anticipation of future deals like this.

7 Stock Splits Investors Are Dying to See: Alphabet (GOOG)

Industry: Digital advertising
YTD Performance: +1%
Share Price: ~$785
Split Potential: 10-for-1 to $78

Some would say Alphabet Inc. (NASDAQ:GOOG, NASDAQ:GOOGL)  has already split with the debut of two new share classes in 2014. However, the tech giant is trading for over $750 a share with both its GOOG and GOOGL stock, so it’s worth revisiting the topic — particularly in context of stock-based deals, like those we discussed with Facebook.

When Alphabet split its stock back in 2014, the move actually created non-voting C shares via GOOG stock that can be used as compensation without diluting actual voting power.

Google has plenty of dry powder with almost $85 billion in cash and investments, but why spend that money if you can use non-voting shares of stock to sweeten the deal instead?

7 Stock Splits Investors Are Dying to See: Amazon (AMZN)

Industry: E-commerce
YTD Performance: +13%
Share Price: ~$760
Split Potential: 10-for-1 to ~$76

You can’t have a list of stocks that need to split without mentioning Amazon.com, Inc. (NASDAQ:AMZN). The e-commerce powerhouse and cloud computing giant is trading for about $750 a share, and despite the stock’s share price topping $100 since 2009, the company hasn’t shown any desire for a split since the dot-com days.

But the time is perfect for Amazon to cut down its share price, given a lot of other moves in recent years to play nice with Wall Street and individual investors including revealing Amazon Web Services fundamentals in 2015 and making profitability a priority.

Why not throw a bone to investors by reducing overall share prices, too?

7 Stock Splits Investors Are Dying to See: Priceline (PCLN)

7 Stock Splits Investors Are Dying to See: Priceline (PCLN)
Source: Priceline.com

Industry: E-commerce
YTD Performance: +11%
Share Price: ~$1,400
Split Potential: 12-for-1 to ~$115

If anyone can afford a split, it’s Priceline Group Inc. (NASDAQ:PCLN). Heck, even a 12-for-1 move would still keep this online travel giant in triple digits! And based on a strong track record of growth — with PCLN stock up 180% in the last five years to more than double the return of the S&P 500 in the same period — Priceline will only keep getting pricier from here.

Sure, Priceline has been a mixed bag lately with its earnings, but it has a great brand and great scale. If it split its stock, PCLN may get just the sentiment boost it needs right now to keep things humming along.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/7-stock-splits/.

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