STOCK SPLITS: A Vital Equity Investing Concept for Physicians and all Investors

Posted on June 8, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Dr. David Edward Marcinko MBA MEd CMP™

SPONSOR: http://www.CertifiedMedicalPlanner.org

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One important equity concept that medical professionals should be aware of is the idea of stock splits.

In a stock split, a corporation issues a set number of shares in exchange for each share held by share holders. Typically, a stock split increases the number of shares owned by a shareholder.

CITE: https://www.r2library.com/Resource

For example, XYZ Corp. may declare a 2-for-1 split, which means that share holders will receive two shares for each share that they own. However, corporations can also declare a reverse stock split, such as a 1-for-2 split where shareholders would receive 1 share for every two shares that they own.


While stock splits can either increase or decrease the number of shares that a share holder owns, the most important thing to understand about stock splits is that they have no impact on the aggregate value of the shareholder’s position in the company.

Using the XYZ Corp. example above, if the stock is trading at $10 per share, an investor owning 100 shares has a 24 total position of $1,000. After the 2-for-1 split occurs the investor will now own 200 shares, but the value of the stock will adjust downward from $10 per share to $5 per share.

Thus, the investor still owns $1,000 of XYZ stock. While stock splits are often interpreted as signals from management that conditions in the company are strong, there is no intrinsic reason that a stock split will result in subsequent stock appreciation.

NVIDIA Splits: https://tinyurl.com/238yze4k

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NVIDIA: Booming Artificial Intelligence & Stock!

Posted on May 23, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

SPLITS STOCK 10:1 ANNOUNCED

By Staff Reporters

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Nvidia sales rose 262% as AI keeps booming

The company whose chips are powering the Artificial Intelligence revolution saw an even bigger jump in sales last quarter than analysts had expected: to $26 billion.

CITE: https://www.r2library.com/Resource/Title/082610254

That’s a good sign for the future of AI and probably for the entire stock market, on which Nvidia has an outsized influence. CEO Jensen Huang declared “the next industrial revolution has begun,” as Nvidia predicted $28 billion in sales this quarter. The company also announced plans to split its stock 10-for-1 next

Stock Splits: https://medicalexecutivepost.com/2023/08/14/stock-splits-a-vital-equity-investing-concept-for-physician-investors/

AI: https://www.sas.com/en_us/insights/analytics/what-is-artificial-intelligence.html

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Wither STOCK SPLITS?

Posted on January 11, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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A stock split occurs when a company breaks up its existing shares to create a higher number of lower-value shares. Stock splits have the effect of reducing the trading price of a stock, which makes it more liquid and more affordable for investors.

Companies that engage in stock splits often have a nominally high share price, which is typically achieved by executing and innovating on the operating front. Companies within this list have high potential for a stock split, given their nominally high stock price.

CITE: https://www.r2library.com/Resource/Title/082610254

Last year, well over 200 companies announced and implemented stock splits. However, the type of split that excites investors most is a forward stock split. This is where the share price of a company is reduced and its outstanding share count increases by the same magnitude, Thus, there’s no change in market cap. Companies that enact forward stock splits are usually firing on all cylinders and out-innovating their competition.

Reverse: https://medicalexecutivepost.com/2022/10/08/what-is-a-reverse-stock-split/

As we go boldly forward into a new year, two stock-split stocks stand out as amazing values that can confidently be bought hand over fist. Alphabet and Amazon? Meanwhile, another widely owned stock-split stock looks to be worth avoiding in 2023. Tesla?

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ALPHABET GOOGLE: Stock Splitting!

Posted on February 7, 2022 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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DEFINITION: A stock split or stock divide increases the number of shares in a company. For example, after a 2-for-1 split, each investor will own double the number of shares, and each share will be worth half as much. A stock split causes a decrease of market price of individual shares, but does not change the total market capitalization of the company: stock dilution does not occur.

CITE: https://www.r2library.com/Resource/Title/082610254

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EXAMPLE:

Google parent company Alphabet said it would split its stock 20–1. That means in July 2022, Alphabet shareholders will receive 19 more shares for every one that they own. It doesn’t mean they’ll be 20x richer—the price of the stock they hold will drop a proportional amount. If the stock split were to happen now, Alphabet’s share price would fall from $2,865 to $143.

Image result for stock split

Why does it matter?

In many ways, it doesn’t. A stock split does not change the value of the company. It’s simply a way to increase the number of shares outstanding.

Think of it like slicing a pizza. At a share price of almost $3,000, Alphabet’s slices were a wide a monstrosity. With the stock split, it’s cutting company ownership into smaller portions. But, in the end, the pizza isn’t growing—there are just more slices to be shared.

So why do it? By making the slices of its company smaller, it hopes that more people will look at them and say, “Well I guess one couldn’t hurt.” Alphabet said the goal of the stock split is to attract more small-time investors who might have been intimidated by buying in at such a steep share price.

  • Only 27 other stocks in the S&P 500 have share prices above $500 besides Alphabet.

And, there’s evidence this bit of corporate inception can be effective. To see why, let’s look at what happened when two other tech giants, Tesla and Apple, split their stock recently.

  • When Apple split its stock 4–1 in July 2020, retail investors upped their purchases from $150 million per week to nearly $1 billion, according to Vanda Research.
  • When Tesla split its stock 5–1 in August 2020, retail investing jumped from $30–$40 million/week to $700 million.

There may be another play for Alphabet here—and that is to pad its resume for inclusion in the iconic Dow Jones Industrial Average. Because the Dow is weighted by share price (an antiquated system, to be sure), Alphabet at its current price would overwhelm all of the companies. It would become the Alphabet Industrial Average. At $247, it becomes a much more attractive candidate for the Dow.

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