With the news that KO is going to do a split this summer, would this be a good time to buy in? Or is there a difference to wait until after the split and buy twice the shares. Does it matter?
With the news that KO is going to do a split this summer, would this be a good time to buy in? Or is there a difference to wait until after the split and buy twice the shares. Does it matter?
Okay, if I give you two fives for a ten are you any richer?
That's the logical answer.
In my experience however, stocks tend to go up after a split...
unless they go down.
Not trying to be funny here, but realistically it shouldn't matter. However a stock split usually does have an impact on the price. Psychology, not logically.
I'm not JustAGuy (without spaces).
I know-I felt like an idiot asking this... but I was curious as to what everyone had to say; sometimes discourse surrounding a seemingly dumb question can bring forth interesting information.Originally Posted by Just a Guy
Last edited by indexxx; 2012-04-25 at 09:59 PM.
I don't think it was a dumb question. The problem is there is no easy answer. There are several questions like that daily on the forum.
One would think, looking at the question that there is a simple answer, that it makes no difference, but reality shows us that it isn't true. The market isn't logical, that's why no one is right all the time.
Heck, I doubt anything makes perfect sense in investing because people are involved. There is no "sure thing", because people are irrational.
I remember following apple before everyone loved them, they'd announce record profits and the stock would tank. Today the stock tanks the day before they announce and booms the next. Why did it tank? Did anyone really think apple would miss?
In real estate it's the same. I've recently seen places for sale that are well below market and they sat for months...once the first units sold, there was a bidding war for the remainder...why the sudden demand?
Psychology is something you need to consider in investing...logic is meaningless a lot of the time, and some things just never make sense.
Of course that doesn't stop the "experts" from giving you the "reason" after the fact, but the truth is they're just guessing as well...
I'm not JustAGuy (without spaces).
It's just a number, but I think small share prices are good for trading, medium prices are good for reinvesting dividends, and high prices are good for selling options.
"Stocks tend to go up after a split"
It's another median nonsense that people should stop repeating and spewing. Look at the statistics of all stock splits and tell me if it's still true.
Or take it from another perspective (management).
CEO: We can't find new buyers for our stocks. Suggestions everyone?
CFO: We can split the stocks to bring in more suckers.
CIO: We can hire Goldman Sachs to sell our junk debt while we took the other side of the CDS on it
CMO: We can hire a PR firm to trump our good deeds
CTO: We can hire a HFT firm to trade it up
Actually the answer is simple ... the split makes no difference.
Other factors such as future business prospects, affordability of the share price, market momentum, institutional sentiment etc. are what will determine in hind sight, whether the timing is good or not.
Over the years, I've had shares split and then the share price dropped in the short term to lower than they were before the split. At other times, the share price kept going up.
The bigger question is what's driving future business and market sentiment.
Cheers
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