{"id":52763,"date":"2014-06-13T20:05:18","date_gmt":"2014-06-14T00:05:18","guid":{"rendered":"http:\/\/countingpips.com\/?p=52763"},"modified":"2014-06-13T20:05:18","modified_gmt":"2014-06-14T00:05:18","slug":"apple-splits-stock-but-is-it-really-good-news-for-tech-investors","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/06\/apple-splits-stock-but-is-it-really-good-news-for-tech-investors\/","title":{"rendered":"Apple Splits Stock \u2014 But is it Really Good News for Tech Investors?"},"content":{"rendered":"
June 13, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

Most Aussies were tucking themselves into bed early on Monday night, after the long weekend.<\/p>\n

I’ll bet very few waited up to see what happened when the US stock market<\/a> began trading after the weekend break.<\/p>\n

So on Tuesday morning, you may have been surprised to see Apple [NASDAQ:AAPL]<\/strong> trading at US$92.71…wait, wasn’t it just trading at US$700-something?<\/p>\n

Yes it was.<\/p>\n

However, back in April, the head honchos at Apple decided to split the stock. For every old Apple share owned, investors would receive seven new Apple shares at the lower price.<\/p>

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It didn’t mean the Apple stock was worth seven times more (or less, depending on how you look at it). In fact, total shareholding is worth the same as before — Investors just hold more of them.<\/p>\n

When the spilt became effective on Monday morning New York time, all chart prices were updated to reflect the new peak.<\/p>\n

Instead of seeing a vertigo-inducing price peak of $705 in September 2012, charts now show an all-time high of USD$100.72.<\/p>\n

This split means there are now about six billion Apple shares on issue, up from 861 million.<\/p>\n

This isn’t the first time Apple has done this.<\/p>\n

Apple did a two-for-one spilt in 1987, followed by another in June 2000, and then a third two-for-one split in February 2005, a couple of years before the iPhone came out.<\/p>\n

But over the past few years, stock splits have been unfashionable.<\/p>\n

In the past, when a share price reached $100, investors just expected a split.<\/p>\n

Between 1997 and 2000, there were 375 stock splits. However, since 2008 only a handful of companies have split their shares each year.<\/p>\n

Rumour has it that Steve Jobs was against a third split after the first two. Supposedly, Jobs ‘loathed’ the idea of anything that could be seen as diluting the value of the company. Even Tim Cook, the CEO of Apple, said two years ago that splits ‘do nothing for shareholders<\/em>’.<\/em><\/p>\n

However, the split has made the stock more attractive to tech investors<\/strong><\/a> who think $100 per share is more reasonable than $700 per share.<\/p>\n

If anything, this can be seen as a psychological boost for the company and investors.<\/p>\n

Mark Hulbert of Marketwatch.com explains it like this:<\/p>\n

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‘The reason that it is bullish, is that it is a signal of something that is good news on the fundamental front. And that good news is confidence on a part of management. <\/em><\/p>\n

‘That not only will the stock price stay on the same level but keep growing and for that reason they need to spilt in order to bring the stock price back into some sort of sweet price.<\/em><\/p>\n

‘It’s ill-defined as what that sweet spot would be but a lower price will attract more investors to buy the shares.<\/em>’<\/p>\n<\/blockquote>\n

Hulbert also adds that most split stock continue to perform better after the split. In this video<\/a>, Hulbert says academic evidence suggests that a split stock will outperform the broader market for up to three years by 12.2%.<\/p>\n

In other words, Hulbert sees people taking this as a short term trading signal to buy into Apple. It shows faith in management and the company in general.<\/p>\n

If anything, Hulbert reasons this is long term signal that Apple will trade higher over the next few years.<\/p>\n

However, after the June 2000 stock split, Apple plunged 57%. Of course, that was during the dot.com bust, so other factors could have contributed to the fall.<\/p>\n

While Hulbert and many others say the split is a bullish signal for Apple, I’m sceptical.<\/p>\n

At several hundred dollars per share, there was a barrier to entry to owning Apple stock. The high price and the volatility deterred risk adverse investors.<\/p>\n

A lower share price will attract more investors. But are these new investors just jumping on board hoping to profit from Apple’s previous success?<\/p>\n

You see, Apple hasn’t released any game-changing technology<\/a> in four years. The last was the iPad. Apple introduced that four years ago in 2010 — though it seems longer ago.<\/p>\n

Of late, instead of developing game-changing products, Apple’s approach has been to turn customers into cash cows.<\/p>\n

They continue to create products that only work with one another. And Apple products are ridiculously simple to use. I’ve never read a manual for an Apple product. I almost regretted buying a Samsung a when I had to study the manual to get the phone going with all its tricks.<\/p>\n

Is it unreasonable for us to expect Apple to change our lives again and again with new technology?<\/p>\n

Apple will launch its next product in the second half of this year. Will it be a game-changer like the iPod or iPhone, or will it be another variation of or enhancement to an existing product?<\/p>\n

If you think it’s the former, then it may be a good time to buy Apple stock. If you think it’s the latter, then it’s probably not worth the effort…or the risk.<\/p>\n

Shae Smith+<\/a>
\n Editor, Money Weekend<\/em><\/strong>
\nJoin Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n

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\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Most Aussies were tucking themselves into bed early on Monday night, after the long weekend. I’ll bet very few waited up to see what happened when the US stock market began trading after the weekend break. So on Tuesday morning, you may have been surprised to see Apple [NASDAQ:AAPL] trading at US$92.71…wait, wasn’t […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-52763","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/52763","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=52763"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/52763\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=52763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=52763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=52763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}