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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: William F. Wager, Jr. who wrote (4176)	2/3/1999 11:21:00 AM
From: John Carragher	Read Replies (1) \| Respond to of 17183

William Here is wall street week. Intent wasn't to distort any ones posts only info. take care John February 3, 1999 Heard on the Street When Stocks Split, So Do Doubting Money Managers By ROBERT MCGOUGH Staff Reporter of THE WALL STREET JOURNAL Investors have gone bananas over stock splits, but some money managers aren't biting. For years, stocks received a small boost, often 3% or 4%, when a company announced it was going to split its stock. Now, it's not uncommon for stocks to surge 10% or more on such news. Indeed, a number of investment services notify investors through beepers and e-mails of stock splits. But some money managers view such revved-up split action as a potential sell signal. When one of his own stocks surges 10% on split news, John Bogle Jr., a portfolio manager at Numeric Investors, takes a good hard look at the stock -- and often, he sells. "Stocks are bouncing more on the announcement of splits," Mr. Bogle says, especially Internet stocks. If the company's underlying business prospects haven't improved at the time of the split, it can be a great time to lighten up or sell the stock altogether, he says. Divide and Conquer Companies that have split their stock recently: Company Date Mkt. Move* ETrade Group Jan. 4 +18.6% Microsoft Jan. 25 +3.6 Xerox Jan. 25 +10.4 eBay Jan. 26 +37.4 IBM Jan. 26 +2.0 McDonald's Jan. 26 +4.0 America Online Jan. 27 +5.4 Intel Jan. 28 +3.2 Oracle Feb. 1 +6.8 Following announcement of stock split Sources: Standard & Poor's, Baseline Stock splits have long delighted individual investors, but confounded money managers and academics who view them as a purely cosmetic change. "I definitely would not advise people to buy stocks on the basis of stock splits," says Tom Marsico, who manages $5 billion at Marsico Capital. The current mania shows there's "a lot of speculation in the market." Of course, there has never been an inherent reason why a split should make a stock perform better. "The firm doesn't make any more widgets the day after the split," notes David Ikenberry, a professor of finance at Rice University. That doesn't matter to some investors. There has been a flurry of big-name splits in recent weeks, and investors have poured in. On Monday, the stock of Oracle rose 6.8% on news that it would split 3 for 2, meaning that shareholders would get one new share for every two they own. Last month, Xerox stock rose more than 10% on news of a 2-for-1 split, and Microsoft stock rose an exuberant 3.6%, despite its antitrust-trial troubles, on news of a 2-for-1 split. The stock of eBay, an Internet auctioneer, rose more than 37% on news of a 3-for-1 split. In all, there were about 35 stock splits in January alone, an unusually hefty number, according to Arnold Kaufman, editor of Standard & Poor's Outlook. The record for splits among New York Stock Exchange stocks in a single year was 235 in 1997. Academic studies have shown that split stocks do well over one-year to three-year periods. Rice's Mr. Ikenberry found that from 1975 through 1990, stocks got an initial 3.5% pop from a split announcement -- and then went on to gain an additional eight percentage points on average more than comparable stocks in the following 12 months. Mr. Ikenberry says the splits didn't cause the improved performance he found. But he believes the splits were a signal from management that it expected good business prospects ahead. If management expected bad news, it wouldn't split the stock, he reasoned, because stocks that fall too low in price start to lose investors who shy away from stocks priced below $10 a share, and especially from "penny stocks." But in the current environment, investors seem to be throwing money into any stock that has split. And some companies appear to be splitting their stock purely to get a temporary boost from the attention they garner -- even if their business prospects aren't particularly bright. On Friday, the U.S. Securities and Exchange Commission suspended trading in six Internet-related stocks until Feb. 11. Only two weeks previously, split-crazed investors had driven up the prices of several of the companies when they announced splits, including Electronic Transfer Associates, USA Talks.com and Citron. There are some high-profile opponents of stock splits. Among them: Warren Buffett, who has never split the shares of his Berkshire Hathaway. The company's Class A shares Tuesday closed at 73,800. Blaine Rollins, manager of two funds at Janus Capital, echoes some of Mr. Buffett's arguments. "I hate stock splits. I hate them because they cost my shareholders more money." Investors have to pay commissions on twice as many shares after a 2-for-1 split. Besides, Mr. Rollins feels the stock price tends to zigzag more after a split as well.