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Summary

  • Key facts of Apple's stock split.
  • The one-month return of past split transactions in 2014.
  • The theoretical positive effects of stock splits did not materialize as expected.

Apple (NASDAQ:AAPL)'s 7-1 stock split is effective on Monday. I am sure that investors have already got a grasp of how the split works and its possible effects from the media. This article will therefore instead focus on providing additional statistical data on past stock splits transactions, in a hope of helping readers to make a more informed decision on how to play it.

Key facts

  • The stock is set to open at $92.22 on Monday.
  • Outstanding stock has increased by 7 times.
  • Neither fundamentals nor market capitalization of the company is changed.
  • Effects of the split: (1) A share of sum becomes more affordable to individual investors; (2) in psychology, investors may consider the stock becomes cheaper after the split.

Like many investors, I am excited to see whether Apple would hit $100 in the short term due to the anticipated higher participation of individual investors. Will the bulls of Apple continue to dominate based on the above theoretical effects? As history repeats itself, some past stock movements post splits are found and presented as follows.

Past split transactions in 2014

The following chart illustrates the short-term returns (over 1 month) of stocks which have undergone splits in 2014, as well as their respective performance compared to the benchmarks. (Remarks: stocks with market value less than 1 billion are excluded due to their high volatility)

Company

Effective date of split

Split ratio

Return rate over one-month period

Comparison with markets

Stock

QQQ

SPY

vs. QQQ

vs. SPY

Trex Company Inc (NYSE:TREX)

8-May-14

2-1

-4.6%

7.2%

4.0%

-11.8%

-8.6%

Nidec Corp ADR (NYSE:NJ)

8-Apr-14

2-1

-4.6%

1.1%

1.8%

-5.7%

-6.4%

Delhaize Group (NYSE:DEG)

7-Apr-14

4-1

6.6%

0.2%

0.8%

6.3%

5.8%

Pegasystems Inc (NASDAQ:PEGA)

2-Apr-14

2-1

-6.0%

-1.9%

-0.1%

-4.0%

-5.9%

EOG Resources (NYSE:EOG)

1-Apr-14

2-1

-0.9%

0.0%

0.7%

-0.8%

-1.6%

Mueller Industries Inc (NYSE:MLI)

31-Mar-14

2-1

-1.3%

0.4%

1.5%

-1.7%

-2.9%

Westlake Chemical Corporation (NYSE:WLK)

19-Mar-14

2-1

-3.5%

-4.6%

-0.2%

1.1%

-3.2%

Cognizant Technology Solutions (NASDAQ:CTSH)

10-Mar-14

2-1

-10.7%

-5.8%

-2.3%

-4.9%

-8.4%

ITC Holdings (NYSE:ITC)

3-Mar-14

3-1

8.1%

-4.2%

1.7%

12.2%

6.4%

Open Text Corp (NASDAQ:OTEX)

19-Feb-14

2-1

-4.4%

0.2%

1.3%

-4.6%

-5.7%

Andersons Inc (NASDAQ:ANDE)

19-Feb-14

3-2

3.7%

0.2%

1.3%

3.5%

2.4%

MGE Energy Inc (NASDAQ:MGEE)

10-Feb-14

3-2

5.0%

4.2%

4.7%

0.8%

0.3%

Toronto Dominion Bank (NYSE:TD)

3-Feb-14

2-1

4.2%

4.4%

3.8%

-0.1%

0.4%

Entergy Transfer Equity L.P. (NYSE:ETE)

27-Jan-14

2-1

5.6%

4.7%

3.9%

0.9%

1.7%

MasterCard Incorporated (NYSE:MA)

22-Jan-14

10-1

-7.5%

1.6%

-0.2%

-9.1%

-7.4%

RLI Corp (NYSE:RLI)

16-Jan-14

2-1

-7.5%

1.6%

-0.3%

-9.1%

-7.1%

Manhattan Associates Inc (NASDAQ:MANH)

13-Jan-14

4-1

12.5%

2.7%

-0.6%

9.9%

13.2%

Companhia Energetica (NYSE:CIG)

13-Jan-14

17-13

0.2%

2.7%

-0.6%

-2.5%

0.8%

Novo-Nordisk A/S (NYSE:NVO)

9-Jan-14

5-1

13.1%

0.0%

-2.1%

13.1%

15.2%

Kapstone Paper and Packaging Corporation (NYSE:KS)

8-Jan-14

2-1

5.3%

0.2%

-2.1%

5.1%

7.4%

Average

0.7%

0.7%

0.9%

-0.1%

-0.2%

(Source: Yahoo! Finance)

On average, the stocks only generated a return of 0.7% over the month after the stock splits, while they underperformed SPY and QQQ by 0.1% and 0.2% respectively. That said, the theoretical effects of stock splits did not materialize as expected.

Furthermore, the stock splits of MA and NVO are worth noting because their large split ratios are comparable with Apple's. Since the differences of their performance with the benchmarks are mainly attributed by their respective releases of financial results in the end of January, the time period between the splits and the end of January should be analyzed instead.

(click to enlarge)

(click to enlarge)

(Source: Yahoo! Finance)

From the graphs, MA underperformed the market by nearly 2% and NVO beat the market by 2%. No sustained positive effects were seen from these stock splits.

Conclusion

The stock would not see $100 simply due to the stock split. All bulls, especially individual investors, should exercise cautious optimism in trading the stock if the stock pops in the following trading sessions.

Source: Apple: Insights From The Past Stocks' Performance Post Splits