Are we back in the 1999 era when stocks spike higher on stock split announcements?
Green Mountain Coffee (NASDAQ:GMCR) started moving higher last week, but then exploded after the company announced that it was effecting a 3-for-1 stock split. Do investors realize that stock splits don't add any real value?
Regardless, the stock has gone parabolic, and is now overbought, and extended. I have taken a small short position on the stock, as I think it could retrace some of this recent run-up.
But the float is small, and the stock seems to being bought with reckless abandon. So I plan on keeping a tight stop-loss on the position.
Disclosure: The author is short GMCR.