Hi steve; Regarding your note on the CPQ CFO's ability to foresee
his company's stock price.
Thought I'd look up the previous few CPQ splits to see what sort
of effect they had on the stock price.
In retrospect, the 5-2 split in '97 isn't looking like a really healthy
time to buy the stock. Not for people who want to make money.
So lets look at the previous two stock splits.
CPQ had a 3-1 split in mid '94, and a 2-1 split in mid '90. Neither
split time was a particularly good time to buy the stock.
The mid '94 split was associated with pretty much flat trading
for the next 10 months, and you could have been in hole as
late as early '96 - 18 months later - if you had particularly bad
at timing your '94 purchase.
Compaq graph 1993-97:
tscn.com
And the 1990 split was a totally disastrous time to buy. The stock
got as low as 60% below that mid '90 peak in '92:
Compaq graph 1988-97:
tscn.com
In fact, from the above chart, it is clear that the best time to buy
CPQ over the past 10 years was a couple years after they split.
So why the constant reminder about the stock split?
I've got an autographed copy of Wade Cook's Wall Street
Money Machine. He gets into stock splits in chapter 11
on page 145.
But you look at CPQ's stock split history, and it just doesn't
compute. It sure looks to me like the stock split game is a
loser's game. (On the other hand, I play options, and I know
those are a loser's game. :) I think you're smarter, and you're just
pumping the good news cause you figure that the smart people
will ignore it while the stupid people will listen.
My theory is that management splits a stock when the share price
has risen more than normal, and everything is looking roses. Just
the time to sell the stock.
In any case, if you're looking for a sucker rally in newly cheaper
(i.e. post-split) CPQ shares, I suggest you convince the instituitional
buyers that they can own more stock at the lower price. Since
IO ownership on CPQ is horrendous, those are the guys you have
to convince not to sell.
But good luck, the institutions are selling this stock, and they
know more than to care about stock splits.
-- Carl |
