Recently, we shared a list of 12 stocks that may soon undergo splits. In this publication, we will compare ASML Holding (NASDAQ:ASML) with other stocks that are also potential candidates for splitting.
Stock splits alter the total number of outstanding shares but do not change the company’s overall market capitalization. A forward split reduces the share price, making it more affordable for investors. Splits can vary widely, from 2-for-1 to 100-for-1 or more. To illustrate, in a 2-for-1 split, one share is divided into two, with the price halved (e.g., a $100 share becomes two $50 shares). This makes shares more accessible and can draw in more investors. While the price per share decreases, the total value for shareholders remains unchanged, thus not affecting ownership control. The primary goal of a stock split is to enhance its attractiveness, particularly for retail investors.
On March 14, Dan Suzuki, Deputy CIO at Bernstein Advisors, discussed the recent three-week decline in market indexes during an appearance on CNBC’s ‘Squawk on the Street’. He pointed out that the recent sell-off is primarily a result of uncertainty, which has negatively influenced market sentiment. Suzuki mentioned that a detailed look at market movements reveals that stocks which surged post-election until mid-February have experienced notable declines, exhibiting a mirror effect. Furthermore, it is the more expensive and high-beta stocks that have been most severely affected due to the market incorporating additional uncertainty into the risk premium. Nevertheless, Suzuki indicated that solid economic data persists, suggesting that alleviation from headline uncertainties could potentially lower the risk premium.
Suzuki raised concerns regarding weak retail sales and spending numbers, attributing some of these issues to weather or seasonal influences. However, he also highlighted resilience in weekly retail sales and other strong leading indicators. He cautioned that ongoing uncertainty could dampen growth. Linking consumer trends to lackluster corporate forecasts and ongoing high inflation, he emphasized the detrimental effect on market sentiment. Additionally, he pointed out how a decline of over 10% in the stock market erodes wealth, particularly for investors in popular stocks. The markets are adjusting to ongoing uncertainty, which is expected to persist, preventing a return to the elevated multiples characteristic of the 2020-2023 period.
In this uncertain market, where risk premiums are elevated, companies contemplating stock splits should carefully consider their potential advantages in light of the prevailing market sentiment. The current economic volatility and shifting consumer behaviors may significantly influence corporate strategies regarding stock splits, especially as firms strive to maintain investor trust amid instability.
We investigated various ETFs, online rankings, and lists to curate a selection of the top stocks trading above $400 as of March 17. From this analysis, we chose the 20 stocks that had experienced significant price increases over the past five years along with a history of stock splits. We then identified the top 12 stocks most favored by top hedge funds and that analysts are optimistic about, ranking them by the number of hedge fund holdings as of Q4 2024.
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