A stock split allows publicly listed firms to change their share prices and outstanding count without affecting their market caps or performance. A forward stock split lowers the price of a firm, making it more accessible to retail investors who may not be able to access fractional-share investment opportunities.
More importantly, stock splits are seen as a sign of strength. Consider it this way: If a firm’s share price wasn’t high enough to consider a split because it wasn’t delivering on its business plan and/or out-innovating its competition, then what sense does that make?
This is an excellent time to buy stock splits, because several well-known firms have announced or implemented them thus far in 2018. But a tiny group of these stocks outperforms the market by a long shot. Here are two split-stock stocks that you can buy right now and keep for the rest of your life.
Alphabet
The first stock-split stock that’s a good buy-and-hold investment is Alphabet (GOOGL -0.27%) (GOOG -0.28%), the parent of Google and YouTube.
In Feb., Alphabet announced that it will undertake a 20-for-1 forward stock split, which was subsequently approved by shareholders. When implemented in mid-July, the split will reduce Alphabet’s share price to approximately $118 compared to its recent high of $2,360 (for Class A shares, GOOGL). As a result, Alphabet’s outstanding share count will be multiplied by twenty.
The company’s search-engine business is one of the reasons Alphabet has been so popular to keep on your watch list. Google has basically become a monopoly during the previous two decades. According to GlobalStats statistics, Google has controlled between 91% and 93 percent of worldwide internet search in the trailing 24 months. Advertisers know that promoting with Google is their greatest chance of getting their message in front of consumers, which is why they are willing to pay such high prices for it. As a result of its near-monopoly status in internet search, Alphabet understands it possesses significant pricing power.
Alphabet’s cloud infrastructure services division is perhaps even more fascinating. Google Cloud is the world’s third-largest cloud service company and has seen revenue rise by 40% to 50% on an annual basis. Cloud infrastructure may be in its early phases, thus providing a long runway for parent Alphabet to increase operating cash flow.
Alphabet shouldn’t have any trouble paying patient investors since it has no shortage of competitive advantages.
DexCom
Continuous glucose monitoring (CGM) system maker DexCom could be a second stock to add to their portfolios without the intention of selling.
In March, the board of directors at DexCom decided to approve a 4-for-1 stock split, which was later given the go-ahead by shareholders during the firm’s 2022 annual stockholders meeting in May. On June 10, this forward split came into effect, with shares of DexCom trading below $78 last week. For comparison, shares were changing hands at a pre-split peak of $659 in November.
The beauty of healthcare companies is that they’re extremely defensive. People will always need prescription drugs, medical devices, and healthcare services, no matter how well or poorly the economy and stock market perform. It does not imply that individuals cease to be sick just because Wall Street or the US economy runs into a problem. This provides a degree of demand stability that few other sectors and industries can compare to.
For years, DexCom has been the world’s No. 1 or No. 2 CGM maker. Despite the fact that the DexCom G7 CGM System will continue to drive double-digit organic sales growth for many years to come, previous versions have preceded it. In other words, continuous improvement is what allowsDexCom to maintain a dominant market position.
Furthermore, DexCom is designed as a high-margin razor-and-blades company. Diabetic patients buy the hardware (the “razor”) they’ll use to read their blood sugar levels and replacement sensors (the “blades”) that monitor and transmit blood sugar levels to hardware devices. It’s ideal for generating operating margin over time.
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