Austin and Eric discuss potential companies that might issue stock splits to make their shares more accessible to retail investors. Austin highlights Costco (NASDAQ: COST), NVR (NYSE: NVR) , and Booking Holdings (NASDAQ: BKNG) as candidates, noting that Costco and Booking Holdings are the most likely to split due to their historical precedents and retail investor appeal.

 

Transcript:

So Austin, shifting gears a little bit, I want to talk about companies that could issue stock splits next because while this doesn’t fundamentally change the value of a stock, we do know that it gives more access to retail investors and people don’t like owning fractional shares as much as whole shares.

So when you’re looking at some overpriced on per share basis stocks, what are a few stocks you could see splitting next?

Yeah, absolutely.

Eric, if there’s anything we’ve seen the last few years, it’s don’t ignore the retail investor with some of the mania that we’ve seen around AMC and meme stocks and GameStop.

Retail investors are just a huge factor in the marketplace.

And although share splits don’t necessarily change any of the underlying economics of the business, they might change the perception of affordability and appeal to those retail buyers.

So there are a couple of companies out there whose shares have really soared on strong performance the last few years that could split.

One is Costco.

Costco shares are about $800 a share right now.

This is a company that has a really strong retail consumer presence.

They’ve got a strong identity with buyers.

There is precedent for a share split.

They last split in the year 2000.

So they have indicated a willingness to split in the past.

And if we saw a 10 for one split right now, that would get shares down below $100 a share, which is a pretty appealing psychological milestone for individual investors.

Another one out there, maybe not as popular with individual investors is NVR.

Arguably, this is the best home builder in the US on just an operating basis.

They’ve long been considered a leader in how well they do lot management and building.

They’re trading for over $7,600 a share.

So while I would certainly love to see them split, this is one that is probably not as likely because they tend to buck a lot of Wall Street trends.

They don’t issue a lot of forecasts.

They’ve allowed themselves to get this expensive in the first place.

So while I would love to see a 50 for one split, and that would put them down to about $150 a share, it’s a little bit of a longer shot.

And the last one is Booking Holdings.

So this is the company behind Priceline.

They’re trading for almost $3,800 a share right now.

Now, although there’s not a lot of retail recognition for the name Booking Holdings, almost everybody knows about Priceline.

So there is retail recognition and enthusiasm here.

A 20 for one split would put them at just below $200 a share.

If they wanted to get below that $100 share milestone, they’d have to do a 40 for one split.

But like Costco, this is a company that actually has a precedent for splitting shares previously.

So they last split in 2003.

So three companies with really elevated share prices right now, Costco, NVR, and Booking Holdings.

Of the three, I’d say Costco and Booking Holdings are probably the most likely to announce a share split sometime in the next year.

Yeah, and we just saw Chipotle issue a 50-1-1 split, so it’s not unprecedented to do a split of that size.

I might note, NVR, second most expensive stock in the market after?

Berkshire Hathaway.

Berkshire Hathaway.

It’s got $600,000 laying around.

You too can own one share of it.

All right.

Thank you, Austin.

 

 

 

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