Three Summer Stock Splits to Keep An Eye On

In general, investors think of stock splits as financial gobbledygook – moves that won’t affect the overall value of their portfolios.  Technically speaking, they’re right.  A split simply cuts a stock’s price while increasing the number of outstanding shares so that the value of any existing position stays constant.  Take the typical 2:1 split – a stockholder who had 100 shares worth $10 each before the split would have 200 shares at $5 each afterwards.  Either way, the investment’s total value is equal to $1,000. 

Usually, companies usually have a material reason to employ such a maneuver; in fact, stock splits can sometimes be a harbinger of bullish action to come.  Whether it’s for the purpose of making individual shares cheaper to the common investor or to purely elicit a buzz, there is surprisingly a historical connection between splits and price.  Below are three companies that have announced they will be undertaking such a move this summer.

FMC Corp FMC A 130-year old chemical manufacturer, FMC Corp has seen its stock double since the recession.  In recent weeks, though, it has been in the red despite impressing the Street with better than expected first quarter earnings.  At the company’s most recent board meeting, it was announced that FMC will split 2:1, and will begin trading at this adjusted price when the markets open this Friday.  Interestingly, FMC has made this move twice in the past, in 1986 and 2007.  In both cases, its shares posted a gain of at least 45 percent in the year following the split.

ONEOK Inc. OKE As one of the largest natural gas distributors in the U.S., ONEOK’s stock price loosely goes with the flow of commodities.  It can be expected, then, that a 10-year low in natural gas prices has not been what investors have hoped for.  Since the start of 2012, shares of OKE have lost nearly 3 percent, though company execs recently reported strong Q1 earnings.  Yesterday, it was announced that earnings guidance had been improved rather significantly through 2014.  On June 1^st, the company’s stock will split 2:1, marking its first such move in over a decade.  Since going public in the days of 8-track tapes and Saturday Night Fever, OKE has split two times.  After the first in 1990, the stock returned 7 percent in a week.  After the second in 2001, however, the stock lost was in the red until a year later.

BLYTH Inc. BTH BLYTH is a small-cap company in the business of making its customers smell good – literally.  It primarily produces the fragrances used in scented candles, air fresheners, and other items sold at your local hole in the wall trinket shop.  For lack of a better pun, investors have also enjoyed the scent of BTH’s earnings, which recently had quite the nice aroma.  Since this release, however, shares have slid almost 4 percent.  On June 15^th, BTH will undergo a 2:1 split, and this is not the company’s first rodeo.  After the stock underwent a similar maneuver in 1995 and 1997, BTH returned an average of 6.1 percent in the following week.

Check back at Benzinga for updates on which stocks will have the case of the splits in the future; your portfolio might just be glad that you did.

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