Six leading stocks split their shares last year. It’s no surprise that almost all of them come from the tech industry. This has led to an increase in fractional shares to buy.
After the impressive surge in technology stocks in 2021, several companies in the sector took advantage of the valuation of their shares to take advantage of it. In June 2022, Amazon (NASDAQ:AMZN) suffered a 20-to-1 split, followed by Shopify (NYSE:SHOP) with a 10:1 split. Later, in August 2022, You’re here (NASDAQ:TSLA) implemented a 3:1 split.
Despite the hype surrounding a stock split, the true value of the event is zero. This is literally a non-event. Instead of one $10 bill in your pocket, you now have two $5 bills. Your pizza was cut into 12 smaller slices instead of six large ones.
While stock splits seem inconsequential, one might wonder why companies opt for them and why they often generate investor enthusiasm. There are several reasons behind these actions, although none are directly related to the inherent investment value of the stock. First, after a split, a stock may appear more affordable to potential buyers. Second, such a move can increase a company’s liquidity. Additionally, spinoffs can help a company meet specific stock listing requirements. Finally, opting for a split can allow a company to convey an optimistic feeling about its future.
So here are three split stocks you should buy now.
Alphabet (GOOG, GOOGL)
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Parent of the Google search engine Alphabet (NASDAQ:GOOG, GOOGLE) was one of the tech stocks that split its shares last year, splitting them 20-to-1 in July 2022. Over the past 12 months, the owner of video streaming service YouTube has seen its shares rise 23%. , although they are up 55%. in 2023.
Alphabet’s main concern is that it is an advertising-centric company whose operations would be severely hampered in a recession. A decline in advertising budgets weighs heavily on financial results.
For the first time since 2014, Google and Meta-platform(NASDAQ:META) Facebook do not represent the majority of global advertising dollars spent online. It fell to 48.2% in January, according to Insider Intelligence data, and is expected to fall to 44% by the end of the year. This also makes it one of those split stocks to pay attention to.
Despite this, Google still has the largest share, estimated at 26.5%. And Alphabet is responding to the threat posed by TikTok with its short-form videos. While the challenger only has a 2% share, this has doubled in just one year.
Of course, Google still owns Internet search. It remains the first place most people turn to when they want to find something. And Google has become a viable and growing threat in cloud-based services. It’s almost doubled its market share at 11% between 2017 and 2022, and generated $8 billion in revenue last quarter, up 28% year-over-year.
Analysts expect Alphabet to continue growing earnings at a compound annual rate of more than 15% over the next five years. There’s still plenty of growth to come when it comes to Alphabet stock.
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Although the warehouse club Costco (NASDAQ:COST) didn’t split its shares last year (the last split was in 2000), maybe it should. The shares trade at $560 apiece, and halving or tripling them would make them more affordable to more investors.
Although buying fractional shares is a reality these days, many investors don’t realize they can do it and there is also a psychological barrier to a higher price.
But Costco is a stock to buy regardless. Although the warehouse club operates under a business model that relies on low-margin, high-volume sales, rising costs are weighing on profits. That’s part of the reason its shares fell 20% last year. It is up 23% in 2023, as inflation has eased, although it remains high.
Most of Costco’s revenue comes from its membership fees, which are typically increased every five or six years. Memberships are also a source of very high profit margin. This helps the retailer remain very competitive on price. It can lower prices for consumers below those of its competitors because it makes up the difference in fees.
Costco last raised its assessments in June 2017. It may stay the course for a while longer, as consumers’ wallets still feel pinched. Richard Galanti, CEO told analysts in May, “At some point we will (raise fees), but our view right now is that we have enough levers to stimulate business.”
However, when it does happen, it will provide an immediate boost to Costco’s top line and help boost profits. The stock will also follow. Overall, this is one of those split stocks to buy.
Novo Nordisk (NVO)
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Danish biotechnology Novo Nordisk (NYSE:NGO) is splitting its shares on September 20 at a 2-to-1 ratio. Investors would be wise to buy shares before or after. Its dynamic weight loss duo Ozempic and Wegovy are the hottest products in medicine and the pills can’t be prescribed fast enough.
Novo Nordisk said it is the dominant manufacturer of glycogen-like peptide-1 (GLP-1) therapies for diabetes and obesity. It holds 65% of the market. Ozempic is in the lead with a share of 44% while Wegovy was reintroduced to the US market in January. Global sales of the pair increased by almost 50% in the second quarter.
The pharmaceutical stock is up 42% this year, 81% over the past 12 months and has nearly tripled over the past three years.
The demand for weight loss treatments is not weakening. Medications even impact elective procedures for obesity with Intuitive surgical (NASDAQ:ISRG) reporting that the demand for bariatric surgery is low.
There’s no difference if you buy the shares now or wait, but Novo Nordisk is a stock that should be in your portfolio.
As of the date of publication, Rich Duprey did not hold (neither directly nor indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com’s publishing guidelines.
Rich Duprey has been writing about stocks and investing for 20 years. His articles have appeared on Nasdaq.com, The Motley Fool and Yahoo! Finance, and he has been featured in U.S. and international publications including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express and many other media outlets.
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