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Technology Stocks : Lucent Technologies (LU)
LU 2.550+2.4%3:59 PM EST
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To: LWolf who wrote (1552)3/10/1998 7:50:00 AM
From: Rob L.  Read Replies (1) of 21876
 
Laura,

IMO, it is purely psychological. Fast mover or slow mover it does not matter. In your example, a move from 54 to 69 is the same as a move from 108 to 138. So you make the same amount of money even though you have less shares at 108. No additional value is created. Do the math:

100 shares at 108 = 10800
100 shares at 138 = 13800

200 shares at 54 = 10800
200 shares at 69 = 13800

If the stocks continually rise and split time after time, then you wold be averaging up, not down. You are continually buying at higher and higher prices, raising your average purchase price, not lowering it. The only reason you would end up with more value is because the share price keeps rising, not because you are buying a stock that splits all the time.

Let's say for theoretical purposes that LU decides to split again when it splits to 54 (it never happens, but let's say it does for arguement's sake). That would put the price at 27. Is there any more value created? No. You just have more shares at a lower price.
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