If you're looking solely at stocks' performance *after* split announcements, then yes, ... If stocks performed notably better (risk-adjusted) *after* splits were announced , and through the date of the split, then it would be possible to benefit, but of course any such advantage would be short-lived because once the phenomena became known, it would get priced in readily.
Here's a 1996 study in which this was the case: 1-year and 3-year returns for split companies starting the month AFTER the split announcement were found to be significantly higher than for a basket of control, non-split companies over the same time. This result was reproduced in a 2003 follow up. A summary is here:
rightline.net
A 1996 study by David Ikenberry of Rice University measured the short and long-term performance of stock splits. His research included all the 1,275 companies whose stock split 2-for-1 between 1975 and 1990. Mr. Ikenberry compared the split stocks to a control group of stocks for similar-sized companies in similar sectors that had not split. His results were startling. The split stock group performed 8% better than the control group after one year, and 16% better after three years.
You can quibble over the logic of this correlation, but it doesn't make it false. Personally, I like the explanation that management wouldn't split stocks unless they believe the shares will continue to appreciate. Consistent with buying back shares and statements that the product portfolio is the "best in 25 years," Apple management is sending the market hints that they are confident. |
