Well, the stock is split because of the price , and there is no rule said that stock should split only once a year , looked at AOL, DELL. The price is a result of the growth of the business. If the company stops growing, the stock price will go south , and as a result low PE. So, low PE is not the fuel to push stock going higher , but a result that
the growth of business slow down. To summarize : High growth ----> High stock price and high PE --------> Stock split.
If the company did not split the stock when the price hit its historical high , which indicated that The managers lost confidence about the continuous growth of the company, so they are not so sure if the stock got split , will the price tank even faster ,
So, they decide not to split. By not spliting the stock, it will also put the investors in a dangerous position. Because , by not spliting the stock at its historical high level, people will sense that managers lost confidence and will begin to sell, this will triger a chain reaction and push the stock further south , and we call this hair cut , instead
of price split ( Not a stock split ). For a strong company and people expect the business of the company will continue to grow , split the stock will push the price even higher , because the split itself showed the confidence of the managers, and lower price after split make the stock more affordable to the retail investors.
So, Do you get the idea why CSCO decides not to split its stock ? Even though DELL, INTC, AOL, LU, MSFT ...etc all split their stocks at their historical price of high level. I smelled something about CSCO , and the smell is not so good. |
