So...when's AAPL going to split again?

[Queso]

I don't know how many of you follow the stock price, but AAPL shares are now trading upwards of US$88. I seem to recall the last time they hit US$90 or thereabouts, the stock split 2:1 to attract the smaller investor.

What do you reckon? Likely to happen again soon?

 

[WildCowboy]

Yes, the last split was right around this same level...they announced the split right around when it hit $80, and it was at about $89 when the split happened a week later.

I suppose one could be coming, but also note that they didn't announce a split when it was at these levels back in January. It depends a lot on how the folks at Apple feel about their stock price going forward. If they see a lot of upside still, they're more likely to split, but if they have any concerns about a drop in stock price, they may hold back. (That's of course not to say that holding back from a split means they think the stock price will drop.)

 

[rdowns]

Analysts (yeah, I know) are writing a lot about the good future outlook of Apple. Predicting record iPod sales this quarter (without including the new Shuffle), the forthcomig iPhone and release of Leopard and continuing high demand for Macs, the revenue streams for the next 2 quarters looks very, very nice.

 

[IJ Reilly]

We'll see after the first of the year. I'd be surprised if they made a move sooner, if only given the stock's recent volatility. Of course a split is strictly a symbolic gesture, but it's a nice one as symbols go.

 

[jhu]

who cares about splits? look at brk-a: $107,400 as of 2006.11.22

 

[IJ Reilly]

who cares about splits? look at brk-a: $107,400 as of 2006.11.22

The most extreme example. Berkshire Hathaway also offers a lower-priced stock which more ordinary people can afford.

 

[WildCowboy]

We've talked in the past about how splits have very little intrinsic effect on stock price since odd lots are no commonplace and able to be traded with no premium on the commission from most brokers. But when you get to high levels, splits actually do have more of an impact on stock price. As an example, Google is starting to reach that level. Say someone has $1200 to invest in a stock. This is a reasonable amount for a small investor to put into a stock because it's large enough that they don't start out in a huge hole due to the commissions. If they want to buy Google, they can only put $1000 into it (two shares), and the Google market leaves $200 on the table because the guy can't buy a Google share with it. If Google splits 5-for-1 and the stock becomes $100 a share, he can put his entire $1200 into the stock. Multiply this effect by a lot of small investors and splitting the stock to a more reasonable price can have a real effect on the market and create a bump.

That said, AAPL isn't at that level yet...and I don't expect it would ever get high enough that the effect would be significant. Like the vast majority of companies, Apple has consistently split its stock as the prices have climbed.

 

[IJ Reilly]

I've watched many of the stocks I've owned, AAPL included, drop immediately after a split. It's not necessarily a long-term effect, but splits seems to be a physiological moment which some investors use to readjust their holdings.

 

[MacBoobsPro]

I've watched many of the stocks I've owned, AAPL included, drop immediately after a split. It's not necessarily a long-term effect, but splits seems to be a physiological moment which some investors use to readjust their holdings.

The way I understand it is (maybe its wrong):

The reason the price drops is because of the split. $60 split 2 for 1 gives you two $30 shares. Generally because a split is a good thing the prices will continue to rise somewhat after the split because people will continue to buy because the company is enjoying a successful spell. Eventually things will level out but you now have twice the amount of shares you had before.

Its like having an apple that keeps growing you cut it in half You still have the same amount but in two halves. If it continues to grow you get twice as much Apple at the same growth rate as before. Its all good. Unless it shrinks of course.

 

[IJ Reilly]

The way I understand it is (maybe its wrong):

The reason the price drops is because of the split. $60 split 2 for 1 gives you two $30 shares. Generally because a split is a good thing the prices will continue to rise somewhat after the split because people will continue to buy because the company is enjoying a successful spell. Eventually things will level out but you now have twice the amount of shares you had before.

Its like having an apple that keeps growing you cut it in half You still have the same amount but in two halves. If it continues to grow you get twice as much Apple at the same growth rate as before. Its all good. Unless it shrinks of course.

Well yes, a 2 for 1 split means stockholders get two shares for every share they own, at half the old price. The impact on the value of their holdings is neutral. I'm simply saying that some investors suddenly seeing all those "new" shares in their portfolios decide that it's a good time to make adjustments they might even have been considering before the split. It tends to wash out in the long run, but a stock's performance in the days following a split can be erratic.

 

[MacBoobsPro]

Well yes, a 2 for 1 split means stockholders get two shares for every share they own, at half the old price. The impact on the value of their holdings is neutral. I'm simply saying that some investors suddenly seeing all those "new" shares in their portfolios decide that it's a good time to make adjustments they might even have been considering before the split. It tends to wash out in the long run, but a stock's performance in the days following a split can be erratic.

Yay I learnt that from Railroad Tycoon

 

[AdeFowler]

I don't claim to understand the stock market, but surely if the share price is lower (say $40), there are twice as many shares in circulation, and smaller investors can buy into the company, that's a good thing?

 

[MacBoobsPro]

I don't claim to understand the stock market, but surely if the share price is lower (say $40), there are twice as many shares in circulation, and smaller investors can buy into the company, that's a good thing?

Anyone investing is a good thing!

 

[IJ Reilly]

I don't claim to understand the stock market, but surely if the share price is lower (say $40), there are twice as many shares in circulation, and smaller investors can buy into the company, that's a good thing?

At one time this was more true than it is today. In the old days, stock brokers charged higher commissions for trading "odd lots" of shares, which included un-round numbers and anything less than 100 shares. With electronic trading this is no longer the case, which is why a company like Google can let their share price run to $500 and nobody much worries about the impact on smaller investors. If they have $2,500 to invest they can by five share at $500 or 50 shares at $50 -- the investment is the same.

 

[Queso]

Yay I learnt that from Railroad Tycoon

Same here.

BTW although this is going back a bit and completely off-topic, did you also work out how to beat that game?

Borrow enough money at the beginning of the first year to buy 60% of one of the competing companies. As you bought the stock they tried to match your share, but then they had to pause to borrow money after you'd both bought 40% due to the rising price, allowing you to snatch the last 20% and take control with 60%.

Then you would transfer all their cash to your company and sell the controlling 10%. The first thing the company did in its independence was borrow money to try and buy 50% of the stock so you couldn't take them over again. But you could buy 10% again as soon as they borrowed the cash and transfer all the borrowed money once again to your company. Repeat the sell, buy, transfer thing until you got close to the two year reporting period, at which point you'd sell all the shares in them before they lost all their value.

End result : By year three of the game you've got about $5m in the bank and no debt and one of your competitors has -$4.5m. You then built your train network with the game on pause, but keeping enough aside to do the same raiding tactic to another competitor in the next two year period. Time it right and by year seven of the game you'd have all the money in the game, your stock would be splitting every two years and your competitors weren't able to afford to build any track, leaving you with a serious head start over the replacement companies when the original opposition collapsed into bankruptcy.

Anyway, after that nerdy little interlude, I'm off to another thread

 

[jhu]

I don't claim to understand the stock market, but surely if the share price is lower (say $40), there are twice as many shares in circulation, and smaller investors can buy into the company, that's a good thing?

there's still the issue of volatility and expense

 

[turtlebud]

It's been a crazy run - I'm wondering how much longer it's going to go up before it goes down again. I wish I would have sold in january when it was at 80 - I ended up buying more when it was down around 55 though (but would have been better if I sold at 80 AND bought at 50). yeah yeah, i know, hindsight is 20/20 and if we knew, we'd all be rich...

 

[jessep28]

It's been a crazy run - I'm wondering how much longer it's going to go up before it goes down again. I wish I would have sold in january when it was at 80 - I ended up buying more when it was down around 55 though (but would have been better if I sold at 80 AND bought at 50). yeah yeah, i know, hindsight is 20/20 and if we knew, we'd all be rich...

What gets me are the people who are like "I had the opportunity in 198X to Berkshire Hathaway stock at so and so price" when its hovering up around 107,000 a share right now.

There will be other investment opportunities. Take a few finance/accounting classes, read the financial literature, research and develop your own strategies and you should be fine.

Investing is a gamble too. With gambling there is risk. Payoffs are good but when your crash you burn.