On Stock Splits

How to Use Stock Splits to Build a Winning Portfolio


It is difficult to see why you should. A 2-for-1 split, for example, merely means you now own twice as many shares that are worth half as much.

But try telling that to Neil Macneale, editor of an investment-advisory service called "2 for 1," whose model portfolio contains only those stocks that have recently split their shares, holding them for 30 months. Over the past decade, according to the Hulbert Financial Digest, that portfolio has produced a 14% annualized return, far outpacing the 8% gain of the Standard & Poor's 500-stock index, including dividends.

Mr. Macneale's track record isn't a fluke. Several studies have found that the average stock undergoing a split outperforms the overall market by a significant margin over the three years following the company's announcement of that split.
Comment: We have two stocks that recently split: Colgate-Palmolive Co. and The Coca-Cola Company . The one I would like to see split is IBM.

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