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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Morgan Drake who wrote (27289)	4/16/1999 2:03:00 PM
From: Gregg Powers	Read Replies (1) \| Respond to of 152472

Morgan: The statistic, while seemingly compelling, is typical academic nonsense. Think about it. There are roughly 20,000 stocks available to be traded. If we compare the universe of stocks that split, to the 'non-splitting' universe, we are arithmetically including a huge basket of companies that may be undergoing some form of financial duress. Presumably a prudent, and otherwise skilled investor, would avoid companies in an obvious state of fundamental decline (just as, presumably, the stocks of these declining companies are not splitting). So, the negative performance of the declining universe, which is adversely selected, distorts the arithmetic comparison between split-versus-non-split stocks. Think about it this way. I would strongly suspect that the stock of companies reporting rising earnings comparisons would show even more dramatic outperformance (than your cited study) when compared to the stock of companies reporting negative earnings. I would argue that stocks tend to split AFTER they had appreciated rapidly, so the 'split-oriented' investor is often engaging in a Newtonian-based momentum strategy, i.e. an object in motion, in this case a rising stock price, tends to stay in motion. Again, this is all fine and dandy in a bull market...and, as I believe in the case of Qualcomm, it is quite possible that the split has come on the heals of a substantive positive change in corporate fundamentals that might, as you suggest, presage prosperity for some time to come. In this case, the split is a CONSEQUENCE of fundamental prosperity NOT the causal factor. That is my principle point. Splits, in and of themselves, mean nothing. People who react to the split, rather than the fundamental framework underlying the split, put themselves in harm's way. All the best, Gregg

To: Morgan Drake who wrote (27289)	4/16/1999 2:08:00 PM
From: Jeff Vayda	Read Replies (2) \| Respond to of 152472

Morgan Drake: Stock splits may indeed result in positive price movement, but as there is no way to test if that company's stock price would have moved or not without the split, the point is moot. There is no basis in science for a stock split to be advantageous. There does not need to be. A company's stock price matters in the market and the majority of the market is about psychology. The prediction of stock prices is nothing more than an attempt at educated guessing. Be it technical analysis, market fundamentals, value investing, Internet mania - take your pick - it is all just educated guessing in the end. That is where Gregg was pulling his hair out for so long. He did the work, he knew the value, but darn it the rest of the world had not caught on. You know, there is nothing to say that the rest of the world need ever catch on. Dont loose sight of that. You just do the best you can: educated guess. Every now and then the psychology of the market takes over and all the smart people make out. But beware, that tide can turn against you just as quick. That is what makes it so much fun! Time to get off my soap box. As you can probably tell, I have no problem sleeping at night - no matter the direction of the market. I dont take it personally. It is the weekend, time for a beer. Come to think about it, the beer probably makes it easier to sleep also. :-) Jeff Vayda