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Technology Stocks : America On-Line: will it survive ...?
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To: J. P. who wrote (10668)7/19/1998 10:34:00 AM
From: BUYandHOLD  Read Replies (2) of 13594
 
J.P

<Still, I hear many "old timers" scoff at talk of splits..>

"Old timers" stress the fact that the INTRINSIC VALUE of company does NOT change because of a split. Even "new timers" cannot dispute that. What appears to change is the short term price. And not necessarily because of of the split either, but the NEWS of the split.
Remember ANY NEWS about a stock which is not negative can raise the price, eg CEO being on CNBC, shaking hands with the Chinese Premier etc..

The distinction is short term PRICE change vs intrinsic VALUE of a company.
If you took 2 companies(A and B) with identical products or services and grew them at the same rate over 10-15yrs.
Then if you split 'company A' every year and 'company B' not at all. I submit to you that in the first few years 'company A' may move slightly ahead because of splits.
Sooner or later INVESTORS will figure it out that 'company B' is in fact worth more than its price and then inevitably will catch up in price.

Many companies have had multiple splits to bamboozle traders in the short run, occasionally with disastrous results especially if they had no commensurate value. The list is too long to mention. One company has foregone splits completely for 30 yrs. The value never went down at all. In fact it has gone up. Considerably. The price is now $75,000.00/share!

But...Dont take my word for it!!

Happy investing

B&H
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