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1 Potential Stock-Split Stock to Buy Hand Over Fist in June, and 1 Stock-Split Stock to Avoid
These headline-making moves can certainly create a bullish buzz, but that doesn't mean they always last.
Most investors understand there's no actual mathematical benefit to a stock split. In the same sense that holding two $10 bills is the equivalent to holding one $20 bill, doubling the number of a company's outstanding shares simply cuts the value of those shares in half -- no net value is created in the process, no matter how many new shares are issued.
As most veteran investors can attest, however, there's still a beneficial bullish buzz surrounding most stocks before, during, and after a split. Indeed, even if it's only a temporary boost, researchers with Bank of America note that stocks gain an average of about twice that of the broad market over the course of the 12 months following a split. Clearly, investors like the unspoken implications of such a move!
Be careful of jumping to sweeping conclusions about these average results, though. Like any other mathematical-mean figure, it can be made up of a wide range of inputs, some of which are at the extreme opposite end of the spectrum as the average number itself.
