Stock Splits: Win or Die Trying

By WallStreetDaily.com

• Apple eyes the finish line.
• Amazon has a trick up its sleeve.
• Who wins the race to a trillion?
• Also recommended: Amazon’s next “mark”?

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Apple is in an epic drag race with Amazon.

It’s a race of historical significance, too.

At stake is the title of “first trillion-dollar company in world history.”

As it stands right now…

Apple is winning by a score of $788 billion to $494 billion.

The $304-billion differential could be the result of Apple’s 7-for1 stock split three years ago.

Let me explain…

Apple’s stock has split four times since the company went public:

• The stock split on a 2-for-1 basis on June 16, 1987.

• The stock split on a 2-for-1 basis on June 21, 2000.

• The stock split on a 2-for-1 basis on Feb. 28, 2005.

• The stock split on a 7-for-1 basis on June 9, 2014.

Yet Amazon’s stock has split only three times since going public:

• The stock split on a 2-for1 basis on June 2, 1998.

• The stock split on a 3-for-1 basis on Jan. 5, 1999.

• The stock split on a 2-for-1 basis on Sept. 2, 1999.

By virtue of its ambitious 7-for-1 split three years ago, Apple strategically made its shares much more attractive to investors. (The perception of being cheap has a psychological impact on investors.)

Now it’s Amazon’s move.

With shares running north of $1,000, will Amazon steal a page from Apple’s playbook and announce a similarly aggressive split? And if so, should you front-run the announcement?

The timing for a major split to happen feels perfect.

So I asked my senior analyst, Martin Hutchinson, to unpack stock splits for us.

Hutch’s full analysis is below.

Ahead of the tape,

Louis Basenese
Chief Investment Strategist, Wall Street Daily

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