Stock Splits Don't Always Add Up to Big Profits

Physician's Money Digest, June 2006, Volume 13, Issue 6

BusinessWeek

Physician-investors tend to get keyed upwhen a company announces its stock issplitting, excited by the bullish prospect thattheir profits from the investment would takea big leap. But, as points out,that's not exactly the case. In research conductedby Finance Investments strategistWilliam Lefkowitz on 22 stocks a monthafter they split in 2005, it was revealed thateight gained at least 4%, seven gained lessthan 4%, and seven dropped in price.Lefkowitz carried out similar research in2004 and drew a similar conclusion, where33 of the 77 split stocks he studied lostground. Despite these seemingly ominousresults, holding on to split stocks for the longterm remains a successful strategy. So if youfind that a stock you own has split and doesnot immediately make a positive leap forward,consider staying the course and don'tcast it out of your portfolio just yet.