A stock that I am considering buying has announced that they will split 2:1 on April 10th. I am now debating whether I should buy now or whether I should wait until the split occurs. In my amateur investor's logic, I would think that now is a good time to buy. What would you do?
Well, I'm know stock analyst, but common sense would tell me to buy now, since the low price after the split might cause a bunch of people to start buying, thus causing the price to go up again....
That's what I was thinking too. I figure that once they split, a lot of people will now be able to buy shares in larger blocks.
what stock is it? does it have a small float right now? if it does then the split would open liquidity to institutions. also a split should not effect whether you want to invest in a company if you like them and plan on being there for awhile. remember that a split doesn't change anything except the float of the stock and the price. the valuations are still the same. a split does not make a stock more valuable or more desirable to own since it is still the same company. further are you investing or are you trading? some people do trade by buying pre-split expecting a run up and sell post-split. i have no clue how well it works but i know people do it. the same thing happens with large dividends. people buy ahead of time (i have no clue why they think this way) to receive the dividend. like check out MSFT back in 11/04 people bought in so they could get the $3 div but then check out what happened to the stock price in the next few months.
The stock is Schlumberger and as we know, they have a pretty big float already. I don't see Schlumberger falling anytime soon (they have probably risen the most out of all of the oil industry) . My rationale is that if Schlumberger splits and you get people to buy in, the stock's value should go up. If nothing else, it should hold its value. I personally would consider investing as opposed to trading because the oil industry doesn't seem to be on a decline, especially with oil prices the way they are. My gut feeling is that Schlumberger will maintain its momentum.
the split will not effect whether people buy into the stock (see GOOG, CME, BRK.A, SEB, and so on). that's basically what you are asking. ultimately the only thing that effects whether people buy a stock for the long run (which is what i think you are looking for) is solid growth and earnings. funds don't buy a stock just because the price is cheaper. just remember a split fundamentally changes nothing. if you saw a stick in half you still have the same stick but its just in 2 pieces.
IMO... A stock will go up upon the announcement of a split (I know the fundementals are the same but that means the company has faith in it's future price). However, the best time to buy is after a split. For some reason, stocks have a history of dropping significantly below the price of the pre-split announcement price after a stock has split (taking into account the split of course).
