Baidu and Green Mountain Plan Stock Split

by Jeff Reeves | May 11, 2010 12:47 pm

Baidu Inc. (NASDAQ: BIDU[1]), China’s leading internet search engine, is scheduled to execute a 10-for-1 stock split on its ADR shares on Wednesday. Another stock split comes soon after  with Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR[2]) executing a 3-for-1 stock split on May 18. That raises the question whether other high priced stocks like Google Inc. (NASDAQ: GOOG[3]), Apple Inc. (NASDAQ: AAPL[4]), Intuitive Surgical Inc. (NASDAQ: ISRG[5]), Priceline.com Inc. (NASDAQ: PCLN[6]) or MasterCard Inc. (NYSE: MA[7]) will follow suit.

Baidu (BIDU[1]) is currently one of the most expensive stocks on the market. BIDU stock will split 10 for 1, bringing the stock’s lofty price of nearly $700 a share down to a digestible $70. Green Mountain Coffee

(GMCR[2]) will follow soon after with a 3 for 1 stock split, bringing shares down from around $75 to $25 a piece. This is after GMCR split 3-for-2 at almost the same time last year.

A stock split is usually executed by stocks that have seen shares soar so high that smaller investors have trouble buying in. Sometimes that’s more of a psychological issue than a pocketbook issue, since 1 share at $100 and 10 shares at $10 both deliver the same profit depending on a stock’s movement.  But even though the underlying value of the company doesn’t change, some traders just prefer to buy in round lots or in large quantities. To hear some traders tell it, a stock split is more of a marketing ploy than anything else.

It’s also worth noting that stocks sometimes see a bounce after such a split, since many investors think the company is more affordable now that the high price tag is gone – even though the fundamentals of the company have not changed. Others assume that the company is pushing share prices down because it expects to see long-term growth.

So which companies will be next to offer up stock splits? Natural candidates are Google Inc. (GOOG[3]) and Apple Inc. (AAPL[4]), which have seen soaring prices for several years. Neither of these companies have had trouble convincing investors to jump in, but as we saw with Berkshire Hathaway Inc. (NYSE: BRK.B[8]) and its massive 50 to 1 split of it’s Baby B shares, even great companies can benefit from such a move. Berkshire B stock shares are up 18% YTD, and surely part of that can be attributed to the split. GOOG stock is trading for around $520 a share, and AAPL stock is around $250 a share.

Other pricey stocks include Intuitive Surgical (ISRG[5]), Priceline.com (PCLN[6]) and MasterCard (MA[7]). ISRG stock is trading around $320 a share, PCLN stock is around $240 and MA stock is around $230. There are no plans as of yet for these stocks to split, but they are some of the largest blue chip stocks to trade over $200 a share.

Tell us what you think here.[9]

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Endnotes:
  1. BIDU: http://studio-5.financialcontent.com/investplace/quote?Symbol=BIDU
  2. GMCR: http://studio-5.financialcontent.com/investplace/quote?Symbol=GMCR
  3. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  4. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  5. ISRG: http://studio-5.financialcontent.com/investplace/quote?Symbol=ISRG
  6. PCLN: http://studio-5.financialcontent.com/investplace/quote?Symbol=PCLN
  7. MA: http://studio-5.financialcontent.com/investplace/quote?Symbol=MA
  8. BRK.B: http://studio-5.financialcontent.com/investplace/quote?Symbol=BRK.B
  9. Tell us what you think here.: mailto:editor@investorplace.com
  10. Emerging Markets Power Uranium Stocks (CCJ, URRE, UEC): https://investorplace.com/experts/paul_ausick/articles/uranium-stock-cameco-ccj-urre-uec-resources-energy-emerging-markets.html
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