Should You Buy Alphabet Ahead of Its Stock Split?
Over the past year or two, investors have seen a number of popular stocks carry out well-publicized stock splits. For instance, Amazon completed a 20-for-1 stock split on June 6, Shopify is planning a 10-for-1 stock split on June 28, and Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) 20-for-1 stock split is scheduled to occur on July 15.
Historically, stock splits have been a sign of management's confidence in the company's ability to keep growing and investors become bullish as well. A recent Bank of America study of companies that have split their stocks shows (on average) they significantly outperform the broader market in the 12 months following the split. But investing veterans know that stock splits don't change the value of a stock in any real intrinsic way. It just cuts up the same-sized pie into a different number of equal-sized pieces.
Using that BofA study as an indicator, short-term investors should be piling into Alphabet's stock, hoping for a quick return on investment. But long-term investors would be prudent to consider the fact that there are plenty of other, much more valid reasons to purchase Alphabet stock besides its upcoming 20-for-1 stock split.
Source Fool.com
