Is it a good idea to buy in anticipation of a split?

[Dee-eight]

I'm looking at MTW, which seems to have good signs in technical analysis. I'm probably going to buy 100 shares in the simulator. The company has announced a 2 for 1 split for March 31.

The question at hand is a general one, though. Do stocks tend to continue trends after a split? The only experience I have with splits is from some decades back, watching LPX go to 70, split, then plummet like a de-feathered Icarus.

How do you experienced traders view announced splits as an indicator?

[spncr2]

Hey Dee-eight,

My best advice for you is to check on past splits in the companies stock (if there has been any of course. Check for the patterns that follow.

Hope it helps a little.

[Dee-eight]

Thanks for a quick response! The company's last split was 3-2 on 4/1/99 and it looks like the stock continued an uptrend afterward. Maybe I'll bump my order up to 200 shares

[gijoe9]

If you look at the split history of MSFT you can get hte idea that a split is a very good thing for a company. It depends on the company and why they are splitting if you look at GOOG and BRK.a and you see that they have not split and they seem to be OK. My recent experience with a stock split involves CAT. I bought 2500 shares at $99.43 pre split and it is trading at a pre split price of 145.40 at the close on Fri. I am up 46.23%.
If you look at a chart for CAT you can see that the effect of the split was positve for the first month or so but then the price dipped down below the price at the split.
I like splits on the biggest of the big companies because they do it so infrequently and there tends to be accumulation after a split. Does not happen every time but most of the time IMO. You have to wonder when a penny stock splits 5 to 1.

[Dee-eight]

Haste makes waste. I entered a market order for 200 MTW last night, and it opened at 81.72

Last trade as of 10:48 was 77.64, and the day's low was 76.49

So, if I'd just been patient and watched for a while, I could have entered the position at less than 77

Living and learning continues apace.

[gijoe9]

Originally Posted by Dee-eight

Haste makes waste. I entered a market order for 200 MTW last night, and it opened at 81.72

Last trade as of 10:48 was 77.64, and the day's low was 76.49

So, if I'd just been patient and watched for a while, I could have entered the position at less than 77

Living and learning continues apace.

Ailun will say that there is a way to predict this kind of thing I am not so sure though and if it went up while you waited?? I think it is hard to time the market but this is MY POV not fact. I am learning to watch and learn about certain stocks/companies and I keep things to a few mostly Canadian ones but some US as well the less is easier to watch. My watch list has about 110 companies on it but I weed it about once a week I would like to see it down to about 25 some day.
Joe

[gijoe9]

I am accumualting C.COS.Un they have anounced a 5 for 1 split will let you know how that goes in a month or two
Joe

[Tyrael33]

"Is it a good idea to buy in anticipation of a split? "

What good is a split? How many investors can only afford $25-$50 dollar shares and not $100? In the real world, most brokerages will require at least several thousand bucks to open an account (at least the last time I checked.) Berkshire Hathaway shares are almost $100,000 each (!), but it keeps a decent valuation. Somebody usually fills the gap if mom and pop investors can't put down that extra $100 for their second share . Anyways you have to make sure that your anticipation is better than others because if there is a spike on news of a split (as their often is, admittedly, to my bewilderment) the opportunity will already be more or less accounted for by other traders and too many traders hanging in there just for the news and then exciting afterwards will actually produce a downwards pressure.