It seems like heresy around here, but I believe the market is essentially rational and efficient, and certainly so for actively researched and followed stocks like AAPL. Remember, a market being efficient does not mean the price is "correct" every moment. It means that there are no systematic, exploitable inefficiencies in stock pricing. Given what I believe to be true, I guess Ryan and I are on the same page.
One very important factor that has not been mentioned in this dialogue (well, HerbVic may have mentioned it) is that a stock split is nearly always accompanied by a dividend increase and, perhaps, more importantly, a stock split conveys positive information about management's assessment of the future. No one wants to split a stock and have it drop 50%. So, when management decides on a split, they are essentially saying "we are anticipating (very?) good results over the next year or two" (or pick your time period). This is extremely valuable information about the company's prospects. It doesn't guarantee management is correct, but it is a strong vote of confidence. The slight outperformance that seems to occur after split announcements is likely due to a dividend increase and a management vote of confidence. May not be popular here, but IMHO, this explains the positive post split-announcement upward bias.
Kip |
