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Stock Split Plays RSS Feed

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Stock Split Plays; This board is dedicated to making money playing stocks that are splitting and stocks that have the potential to split. Below is a brief description on how I play this type of investment strategy involving both Options and the actual Stock. Why Play Splits; I always here splits don't matter, if it splits 2 for 1 all you have is twice as many shares and the stock price cut in half...nothing changes! Well, I disagree with that theory for several reasons. 1.If the net effect to current shareholders is zero, then why do companies choose to split their stock? Typically, a firm's board of directors decides to split its stock in an effort to reduce its share price. After all, high prices can act as a deterrent to prospective buyers -- particularly smaller ones. A stock split will reduce a company's share price to a level that is hopefully seen as more affordable to a broader range of investors. There is a mental value people tend to back off from buying higher priced stocks, especially if they are over $100. Investors now feel more comfortable owning more and cheaper shares. 2. Theory; Companies that split their stocks have typically enjoy a big run-up in share prices, and the split announcement is a heads-up to investors that the board expects the good times to keep on rolling. After all, a soundly managed company that believes its stock is overvalued after a run-up isn't likely to announce a split because it expects the price to slip back on its own. 3. Stock splits also increase the liquidity of a stock. Also being for liquid will in effect attract institutional investors than a less liquid stock. 4. Most companies prefer that to keep their share prices at a much more affordable level. The goal here is to make their stock accessible to as many investors as possible. 5. However, it's important to remember that stock splits in and of themselves have zero impact on a firm's actual value. Of course, that doesn't mean stock splits are completely useless either. After all, it's important for a firm to keep its share price in an optimal range to make it affordable for as many investors as possible. (The larger a firm's potential investor base, the greater value it is likely to attain in the market.) In addition, although a stock split itself doesn't add value, it often serves as a positive signal from company management (firms only tend to split their shares when they believe their fundamental corporate prospects are strong). As a result, studies have shown that stocks tend to outperform the market immediately after a split. -------------------------------------------------------------- The plays the I do are below this section and also posted on the main board as plays posted by other members; First I will list some common terms; Split Ratios: The majority of stock splits are 2-for-1. That means for every one share of stock owned, one additional share will be received with the result being that the shareholder will own two shares for every one share currently held. 2-for-1, 3-for-1, 3-for-2, and 5-for-4 are all popular split ratios; however, there is no limitation on the ratio. Split Record Date: This is probably the most confusing term within a split announcement. The reason for this is that many investors are used to associating this date with a "cash" dividend. To receive a "cash" dividend you must own the stock on the record date. In the case of a stock split, the record date is meaningless. Split Pay Date: This is the date that the stock dividend or split will be paid. ============================================== Ways To Play Splits; I am not going to try and write a book here, just give ways to play them. There are many ways to play splits and you just have to adhust your investment goals to conform with your split strategy. Discussion on the boards is encouraged. 1. Pre-Announcement: This is just bacically when you try and pick a split ahead of time before it is announced. Many stock have a history of spliting their stocks at different time and when their stock reaches a certain price. Most all the time though, it is usually on or before and eranings announcement. Also, sometimes shaortly after an earnings announcement. Splits can also be voted on during an annual meeting. These are the plays where you can potentially make the most money! 2. Pre-Split: This is the time after the announcement is made until the actual day of the split. 3. Post Split: These are plays after a split occurs. Generally a stock will continue a run after a split but is not always the case. This all depends on the stock and the market and sector conditions. =============================================== Companies That Have Announced Splits and Dates: =============================================== Splits Calander: FEB http://biz.yahoo.com/c/s.html =============================================== Earnings Announcements: http://biz.yahoo.com/research/earncal/today.html =============================================== Conference Calls: http://biz.yahoo.com/cc/ Other Links Options Links; CBOE: http://www.cboe.com/delayedQuote/QuoteTable.aspx ==============================================
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