Stocks that have recently been split are bound to experience an inflow of new, smaller retail investors who may find the freshly-lowered share prices more practical. Of course, a lower share price doesn’t mean much, if anything, since the number of shares issued will be greater. How many times you cut the cake doesn’t matter as much as the caliber of the cake.
Despite no value being created, it’s not hard to imagine the rush of beginner investors looking to jump in after a forward stock split because it just feels better to get a handful of shares for $1,000 than just one or two, especially if you have to pay a commission. In any case, increased accessibility to investors is never a bad thing. Though, I wouldn’t factor in such as a part of the valuation process.
For the most part, it doesn’t make much sense to pursue a stock solely because it’s recently experienced a split. However, if you’ve been eyeing a company for a while, have limited capital to put to work, and the split has made a stock more palatable, perhaps it’s a great time to finally hit the buy button.
Let’s have a look at two stock split stocks that also look cheap and timely in July. With robust fundamentals and a lot riding behind them, perhaps their recent splits are the least important factor for prospective buyers.
BYD
Chinese electric vehicle (EV) maker BYD (BYDDF) experienced a big 3-for-1 split back in June. Now a month after the split (shares currently going for $15 and change per share), I think it’s time to load up on the firm that the late Charlie Munger once spoke very fondly of. As BYD looks to get back on the right track after falling over 21% from all-time highs, perhaps the opportunity to snag a few shares of the OTC shares at 7.3 times trailing price-to-earnings (P/E) won’t last all too long.
With a slew of new models on the way and an ambitious plan to further expand beyond the borders of China, I do see ample catalysts in place that could propel the stock in the coming 18 months. Of course, price cuts and competition with Tesla (NASDAQ:TSLA | TSLA Price Prediction) in overseas markets could pave the way for more volatility, especially as Trump tariffs rattle the world economy in the second half.
Either way, I think BYD is priced with fairly reasonable (even low) expectations in mind. As such, I’d not hesitate to stash the name on my watchlist on weakness. At this juncture, it’s one of my favorite stock split stocks to consider backing up the truck in July.
O’Reilly Automotive
Sticking with the automotive theme, we have shares of O’Reilly Automotive (NASDAQ:ORLY), which had a massive 14-for-1 split in June. Today, shares trade at just over $92 per share, making them easier to digest for new investors who have less than four figures of new money to put to work in markets. Over the past five years, the auto parts retailer has stealthily outpaced the S&P 500, gaining a whopping 230% in the last five years. Not at all a bad return for the fairly under-to-understand business of auto parts retailing. Either way, it’s the knowledgeable customer service and the massive national footprint that set O’Reilly apart from the pack.
With Pro and DIY both “flooring it” for the firm, I’d not be too surprised if the steady, smooth multi-year rally has legs, even as the economy deals with stagflation-like headwinds in the second half. If anything, it makes more sense to fix up one’s old ride than buy a new vehicle when times get a bit tougher. In that regard, I continue to view O’Reilly as more of a defensive consumer discretionary. At around 31.1 times forward P/E, shares remain quite expensive, even though the share price is now a fraction of what it was prior to the big June split.
If you want top-tier, low-beta (0.60 at writing) growth, though, such a premium price of admission only seems fair.
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