(puff, puff) OT! Stock Splits. Though it is (heh, heh) unlikely here and now for our beloved PNLK, I ran across a fine article on the attractiveness of stock splits. Seems the research indicates that stocks that split do better than the indexes a full year after the split.
Sorry for the long post that follows. If you want to skip go to
rightline.net.
Stock Splits Expected to be Driving Force inMarket Appreciation, According to Report
January 20, 1999 05:16 PM
ROUND ROCK, Texas--(BUSINESS WIRE)--Jan. 20, 1999--Companies who split their stock tend to significantly outperform the market indexes for over a year after the split, according to the Right Line Split Report.
Why? A general motivation is to make the stock more affordable for the average retail investor. Further, as the demand for the stock at the lower price increases, so does the price. It's mostly psychological, but why fight the trend?
The Right Line Split Report is one of the few investment resources available that focuses on stock splits as a basis for selecting investments. In a recent issue the editor wrote, "We are coming into a period where the number of split announcements is looking like they are ready to explode. We have a number of excellent companies due to report earnings which are trading at all time highs (often far above where their last split occurred.)"
When asked whether all the split candidates actually do split, they responded, "No, occasionally we miss, but frequently alternative events occur such as a buyback. However, our work has demonstrated that a split candidate typically makes an extremely powerful move in anticipation of the potential split announcement date. Therefore, even if the announcement doesn't play out, subscribers often profit handsomely from the robust appreciation in the share price."
"Several of our current split candidates, Microsoft MSFT , International Business Machines IBM and Sun Microsystems SUNW have made powerful moves. Since presenting these to our subscribers MSFT has soared +28 points, IBM +24 and SUNW +20. Although we anticipate these stocks will split soon, we don't believe our subscribers who are currently invested will be too terribly disappointed if we don't get the announcement."
Wouldn't you enjoy the idea of owning the stock before it announces a split? With Yahoo! YHOO and Solectron SLR under their belt in the first eleven trading days of 1999, the RLSR is out to beat last year's record of 3+ split announcements per month. Just take a look at the number of split announcements forecasted in 1998:
Guidant GDT , Bristol-Myers BMY , Merck MRK , Network Appliance NTAP , Automatic Data AUD , America Online AOL , Schering Plough SGP , Dell DELL , Cisco Systems CSCO , Aspect Development ASDV , Delta Air Lines DAL , Yahoo YHOO , Lowes LOW , Home Depot HD , Storage Technology Corp STK , American International Group AIG , Nordstrom NOBE , Allstate ALL , Sanmina Corp. SANM , CVS Corp CVS , HBO & Company HBOC , Clear Channel Comm CCU , Bell Atlantic BEL , Amazon.com AMZN , Best Buy BBY , Globalstar Telecom GSTRF , I2 Technologies ITWO , Bank Boston BKB , Walt Disney DIS , BMC Software BMCS , AMR Corp AMR , Carnival Corp CCL , Ballard Power Systems BLDPF , Kohls Corporation KSS , Household InternationalHI , American Home Products AHP , Dell Computer DELL , Lucent Technologies LU , Donaldson, Lufkin & Jenrette DLJ , Abbott Labs ABT , America Online AOL , Airborne Freight ABF , Microsoft MSFT , Citrix Systems Inc. CTXS
While split predictions are usually excellent short-term trades, the big wins are the longer-term position trades. The power of the stocks they cover is apparent by their extensive stable of winners. Don't be fooled by other services that only give you the sugarcoated stuff. Check out their Web site at rightline.net and view the table of 1997-1998 percentage gains that the above splitters achieved in relation to the major indexes. It's straightforward, verifiable and even shows a few that didn't fare so well.
But that's the nature of the Right Line staff.
Unlike other on-line publications, the Right Line Split Report provides ongoing education sprinkled through out the newsletter along with introductory material to get new subscribers started. But it doesn't end there as there is ongoing support offered via feedback.
The Right Line Report is a newsletter that is emailed to subscribers three times a week. A discussion of Market News and Conditions typically precedes a performance recap of current and past companies that have split their stock followed by a list of split candidates as well as extensive coverage on companies that have recently announced splits.
Visit their Web site at rightline.net. They offer a two-week free trial.
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