Is there any reason to buy shares before/after a split?
Assuming you plan to buy a whole number of shares and have a maximum dollar value you intend to invest, it may be better to wait for the split if the figures don't quite work out nicely. For example, if you are going to invest $1,000 and the stock pre-split is $400 and the split is 2 for 1, then you'd buy 2 shares before the split unless you have an extra $200 to add. Meanwhile, after the split you could buy 5 shares at $200 so that you invest all that you intend. Aside from that case, it doesn't really make a difference since the split is similar to getting 2 nickels for a dime which in each case is still a total value of 10 cents. There has been a lot of research on the effects of stock splits. Some studies have concluded that: However note that (i) these are averages over large samples and does not say it will work on every split and (ii) most of the research is a bit dated and more recent papers have often struggled to find any significant performance impact after 1990, possibly because the effect has been well documented and the arbitrage no longer exists. This document summarises the existing research on the subject although it seems to miss some of the more recent papers. More practically, if you pay a commission per share, you will pay more commissions after the split than before. Bottom line: don't overthink it and focus on other criteria to decide when/whether to invest.
"In 2005, Apple announced a split on Feb 11... CUPERTINO, California — February 11, 2005 — Apple® announced today that its Board of Directors has approved a two-for-one split of the Company’s common stock and a proportional increase in the number of Apple common shares authorized from 900 million to 1.8 billion. Each shareholder of record at the close of business on February 18, 2005 will receive one additional share for every outstanding share held on the record date, and trading will begin on a split-adjusted basis on February 28, 2005. ...one month after announcing earnings. CUPERTINO, California—January 12, 2005—Apple® today announced financial results for its fiscal 2005 first quarter ended December 25, 2004. For the quarter, the Company posted a net profit of $295 million, or $.70 per diluted share. These results compare to a net profit of $63 million, or $.17 per diluted share, in the year-ago quarter. Revenue for the quarter was $3.49 billion, up 74 percent from the year-ago quarter. Gross margin was 28.5 percent, up from 26.7 percent in the year-ago quarter. International sales accounted for 41 percent of the quarter’s revenue. I wouldn't expect Apple to offer another split, as it's become somewhat fashionable among tech companies to have high stock prices (see GOOG or NFLX or even BRK-A/BRK-B).  Additionally, as a split does nothing to the underlying value of the company, it shouldn't affect your decision to purchase AAPL.  (That said, it may change the perception of a stock as ""cheap"" or ""expensive"" per human psychology). So, to answer your question: companies will usually announce a stock split after releasing their financial results for the preceding fiscal year. Regardless of results, though, splits happen when the board decides it is advantageous to the company to split its stocks." I was doing some thinking about this a while back, and it makes absolute perfect sense for Amazon to buy UPS with issued shares.  First off, Amazon's stock is overpriced in every form of the word, which means using issued stocks to buy things is the best way to abuse the current situation. It gives even more validity to their share price. Some examples... If lets say Amazon issued 1 extra share for every existing share, it would give them 235 billion of purchasing power. If they used this to buy 235 billion worth of utility companies, the stock price cannot really go down below 235 billion in market cap, because they own 235 billion in real, valuable companies. So if a completely worthless company like the South Seas Company issued stock to buy real businesses, they could make validity to their absurd price. If the South Seas Company had a market cap of 500 billion at their high, and issued 1 share per existing share, and bought 250 billion dollars of businesses and assets, they suddenly became a real company and cannot really go under a market cap of 250 billion. Too bad they didn't, and the company went under almost instantly once the scam was found out.   By buying UPS, they gain the company at a discount of the discrepancy of Amazon's price and intrinsic value. But the biggest reason to merge with UPS is for their current customers. So with deliveries, Amazon would have to spend the same amount on their route as UPS. They still have to hire a driver for 8 hours a day, they still have to pay for the same amount of gas, and they stop at more or less the same amount. So your expenses are fixed. Any extra package that Amazon would deliver that they wouldn't before, is almost pure profit. The expenses don't change if the truck is 3/4 full, or full. Which means that all of UPS's business would become almost pure profit. They need to buy UPS or Fedex, making a new service is a huge mistake. It's probably just a bargaining chip in negotiation because of these reasons.  Also a side note, Amazon should also buy a huge railroad. They have a part in every inch of this country, and to buy its own method of transportation to transport boxes, which is more fuel and time efficient than trucks makes sense. They would also be able to design a lighter weight train designed to just carry boxes. Sending one truck to a warehouse is much more costly than just attaching a light weight train car heading to that warehouse anyways.   Just my two cents if I were CEO of Amazon. I bought 1000 shares of a $10 stock. When it doubled, I sold half, no need to be greedy. I watched the shares split 2 for one, and sold as it doubled and doubled again. In the end, I had $50,000 in cash pulled out and still had 100 shares. The shares are now worth $84K since they split 7 for one and trade near $120.  Had I just kept the shares till now, no sales, I'd have 14,000 shares of Apple worth $1.68M dollars.  $130K for an initial $10,000 investment is nothing to complain about, but yes, taking a profit can be the wrong thing. 25%? Was that all the potential the company had?  There's one question to ask, not where is the price today compared to last year or two years ago, but what are the company's prospects. Is the reason I bought them still valid? Look at your investment each quarter as if you were making the decision that day. I agree, diversification is important, so the choice is only hold or sell, not to buy more of a good company, because there are others out there, and the one sane thing Cramer says that everyone should adhere to is to not put your eggs in one basket. "I understand you make money by buying low and selling high. You can also make money by buying high and selling higher, short selling high and buying back low, short selling low and buying back even lower. An important technique followed by many technical traders and investors is to alway trade with the trend - so if the shares are trending up you go long (buy to open and sell to close); if the shares are trending down you go short (sell to open and buy to close). ""But even if the stock price goes up, why are we guaranteed that there is some demand for it?""  There is never any guarantees in investing or trading. The only guarantee in life is death, but that's a different subject. There is always some demand for a share or else the share price would be zero or it would never sell, i.e zero liquidity. There are many reasons why there could be demand for a rising share price - fundamental analysis could indicated that the shares are valued much higher than the current price; technical analysis could indicate that the trend will continue; greed could get the better of peoples' emotion where they think all my freinds are making money from this stock so I should buy it too (just to name a few). ""After all, it's more expensive now."" What determines if a stock is expensive? As Joe mentioned, was Apple expensive at $100? People who bought it at $50 might think so, but people who bought at $600+ would think $100 is very cheap. On the other hand a penny stock may be expensive at $0.20. ""It would make sense if we can sell the stock back into the company for our share of the earnings, but why would other investors want it when the price has gone up?"" You don't sell your stocks back to the company for a share of the earnings (unless the company has a share-buy-back arrangement in place), you get a share of the earnings by getting the dividends the company distributes to shareholders. Other investor would want to buy the stock when the price has gone up because they think it will go up further and they can make some money out of it. Some of the reasons for this are explained above." It might be clearer to think of it as price going up when a dividend is expected, since that's money you'll get right back. As the delay before the next dividend payment increases, that becomes less of a factor, Since you asked about Apple, and I happen to have two positions -   This is what happened. I was long the $500, short the $600, in effect, betting Apple would recover from its drop from $700 down to $450 or so. Friday, my target was to hope that Apple remain above $600, but not really caring how much it went over. Now, post split, the magic number is $85.71. My account shows the adjusted option pricing, but doesn't yet show AAPL's new price. I would say that the answer is yes.  Investors may move on purchasing a stock as a result of news that a stock is set to pay out their dividend.   It would be interesting to analyze the trend based on a company's dividend payouts over 10 or so years to see what/how this impacts the market value of a given company. Buy low, sell high. I think a lot of people apply that advice wrongly. Instead of using this as advice about when to buy and when to sell, you should use it as advice about when not to buy and when not to sell. Don't buy when P/Es cannot support the current stock price. Don't sell when stocks have already fallen due to a market panic. Don't follow the herd or you will get trampled when they reverse direction in a panic.  If you are smart enough to sell ahead of the panics, more power to you, but you should be using more than a 52-week high on a graph to make that decision.