This article will discuss the 10 stocks that may be splitting soon.
Understanding Stock Splits
A stock split is when a company literally splits its stocks – it divides its existing shares into multiple new shares. This increases the number of shares outstanding without changing the company’s overall value while making the stock more affordable and accessible to smaller investors.
A company’s board of directors determines the ratio of a stock split. This can range from a common 2-for-1 split, and go as far as 100-for-1, or more. For instance, in a 2-for-1 split, each existing share is divided into two new shares. The price per share is reduced by half, but the total market capitalization remains unchanged. So, a stock split can increase liquidity and potentially attract more investors, by giving 2 shares valued at $50, instead of 1 at $100, and the company’s market cap is not impacted.
As the share price adjusts downward, dividends per share will also be adjusted to maintain the same total dividend payout. Similarly, all things tied to the share price are adjusted according to the split. However stock splits are non-dilutive, so existing shareholders’ voting rights remain unchanged.
Stock splits aren’t just beneficial to small investors trying to buy shares in big companies, they can also benefit companies by allowing them to repurchase shares at a lower price. But in one way or another, the eventual goal is to enhance a stock’s appeal to investors and make it more accessible to retail or individual investors.
At the end of the day, a stock split does not inherently create additional value for a company, a good company remains a good company after a stock split. Similarly, a bad company remains a bad company. A temporary reduction in share price followed by higher investor interest might cause the stock to surge in the short run, but no meaningful impact should be expected in the long run.
Experts Weight In on The Market Situation Right Now
We’ve seen a range of high-profile stock splits in 2024, especially in the semiconductor space. They seem to be the new cool thing to do for every company. However, these moves should be treated as no more than just making shares more accessible to smaller investors, and value investors should focus on fundamentals when they’re contemplating their next best idea.
The markets have been on a wild ride, all thanks to AI. The valuations have gotten out of hand, but we’ve also seen some corrections. Analysts are expecting earnings growth of 15% in 2025 along with rate cuts of up to 225 basis points. The Fed is expected to deliver its first cut in September after hiking interest rates constantly and holding them higher for longer. Jeff Krumpelman, the chief investment strategist at Mariner Wealth Advisors, and Julie Biel, the chief market strategist at Kayne Anderson Rudnick, recently appeared together on CNBC to discuss these dynamics and both had similar but contrasting opinions.
Krumpelman expressed optimism, citing strong fundamentals and improving economic indicators, particularly inflation. He believes we’re not in a recessionary scenario and sees potential for the S&P 500 to reach 6,000 by mid-2025, driven by solid earnings growth, healthy guidance, and projected GDP growth of 1.5% to 2.0%. Here’s what he said:
“We look at the individual stocks, we find a broadening market, and we find general health in terms of earnings growth and valuation. So, we’re optimistic and constructive.”
Biel, on the other hand, raised concerns about potential risks related to high valuations making stocks more fragile. She emphasized that the last time the market was this optimistic was back in 1984, just once in modern history. Biel remained cautiously optimistic and pointed to the $1 trillion in credit card debt and rising delinquency rates.
Most successful companies have a history of stock splits, but their share prices consistently return to levels where another split is warranted. Yet it is a widely practiced phenomenon and investors globally anticipate such moves from big companies to improve trust. In this context, we’re going to talk about the top 10 stocks that may be splitting soon.
Our Methodology
For this list, we first looked into internet rankings and online lists to find stocks trading above $900 that haven’t split for at least quite a while now. Then we considered business fundamentals and various financial metrics to identify potential candidates for the top 10 stocks that may be splitting soon. These companies are profitable businesses and most of them have some stock split history, if not all. These stocks are then listed in ascending order of the number of hedge fund holders.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Small Cap AI Stocks to Buy According to Short Sellers
10. WW Grainger Inc. (NYSE:GWW)
Share Price as of August 30: $968.04
Number of Hedge Fund Holders: 32
W.W. Grainger Inc. (NYSE:GWW) is an industrial supply company that deals with maintenance, repair, and operating (MRO) products, ranging from tools and fasteners to safety equipment and electrical components. The company has a strong online presence and physical branches worldwide, catering to various industries.
Recently, the company released its 2024 Environmental, Social, and Governance (ESG) Report. It reduced its global absolute Scope 1 & Scope 2 emissions by 31% since 2018, achieving its 2030 target of 30% reduction 7 years early. Now the updated 2030 target is a 50% reduction.
W.W. Grainger Inc. (NYSE:GWW) partnered with YouthBuild USA, aligning with its community strategy pillars to advance the emerging workforce and empower youth.
In Q2 of 2024, the company reported a sales increase of 3.1%. The High-Touch Solutions and Endless Assortment segments contributed to this aggregate sale with individual 3.1% and 3.3% rise respectively. The increase in sales resulted in 3.11% year-over-year revenue growth, with $4.31 billion in revenue, and $9.76 in earnings per share.
Due to temporary market dislocation, it might not meet the 2024 market share target. Yet, by June 30, 32 hedge funds were long in the company, with the highest stake at $74,434,800 by Citadel Investment Group.
In 1 year, the company saw a 33.47% increase in its stock price. While this might not say a lot about whether a company plans a stock split or not, given W.W. Grainger Inc.’s (NYSE:GWW) history of 3 stock splits in the late 1900s, the option does not seem unlikely.
The company adjusted its margin outlook for the remainder of 2024. It’s now focused on managing expenses and returns while growing SG&A slower than sales over time. The daily organic constant currency sales are expected to grow 4-6%. Such plans make it plausible for the company to go for a stock split.
ClearBridge Multi Cap Growth Strategy stated the following regarding W.W. Grainger, Inc. (NYSE:GWW) in its first quarter 2024 investor letter:
“W.W. Grainger, Inc. (NYSE:GWW), in the industrials sector, was our largest new buy. Grainger is the biggest industrial maintenance, repair, and operations distributor in North America. The company is a share gainer in a large and fragmented market, with less than 10% share of the addressable market for their direct, “high touch solutions” business estimated at more than $165 billion. Grainger has also barely scratched the surface with its online “endless assortment” platform, Zoro.com, which targets an even larger market. In addition to its growth and profit potential, we are attracted to Grainger’s strong balance sheet and improved capital allocation under its current management.”
9. Fair Isaac Corp. (NYSE:FICO)
Share Price as of August 30: $1,713.29
Number of Hedge Fund Holders: 42
Fair Isaac Corp. (NYSE:FICO) is a data analytics company focused on credit scoring services, which uses the FICO score, a measure of consumer credit risk widely used in the US to measure an individual’s creditworthiness. It also provides other solutions for financial services, healthcare, retail, and telecommunications.
In FQ3 2024, the company repurchased 196,000 shares of Fair Isaac Corp. (NYSE:FICO) at an average price of $1,293 per share and announced a new Board authorization for $1 billion of share repurchase.
Such actions have prompted the share price to surge 90.64% in just 1 year. One can anticipate a stock split following this surge, especially considering the company’s history of 4 stock splits in 1995, 2001, 2002, and 2004.
Overall, the company has been performing well. Management highlighted new features of the FICO Platform, which aims to enhance real-time decision-making for businesses. These features include improved data management, faster model optimization, enhanced credit risk modeling, and better decision simulation capabilities. Westpac NZ has successfully used the FICO Platform to meet evolving customer and regulatory requirements.
Fair Isaac Corp. (NYSE:FICO) reported strong FQ3 results with total revenue up 12.33% to $447.85 million. The earnings per share were $6.25 in this period. The Americas region contributed 85% of total revenue. The company’s scores segment saw the highest increase by 20%, driven by B2B growth, offset by B2C decline.
The company is held by 42 hedge funds. The largest stake is positioned at $1,306,668,338 by Valley Forge Capital.
Fair Isaac Corp.’s (NYSE:FICO) software business is thriving, driven by strong SaaS bookings and a successful FICO World event. The scores business continues to excel, offering valuable solutions, with a commitment to financial education, inclusion, and an aim to reach underserved communities.
Conestoga Capital Advisors stated the following regarding Fair Isaac Corporation (NYSE:FICO) in its Q2 2024 investor letter:
“Fair Isaac Corporation (NYSE:FICO): FICO is a leader in predictive analytics and decision management software and is also the provider of FICO credit scores. Fiscal 2Q24 results came in ahead of consensus’ expectations, with upside in revenue and margins due to special pricing in the Scores business. This also drove a healthy non-GAAP earnings per share (EPS) beat. While software revenue and bookings fell a bit short of expectations, platform growth continues at a solid pace and margins showed further signs of scaling higher. Importantly, FICO’s pricing power remains intact, and we believe this bodes well for future results.”
8. Autozone Inc. (NYSE:AZO)
Share Price as of August 30: $3,204.73
Number of Hedge Fund Holders: 45
Autozone Inc. (NYSE:AZO) is the largest US retailer of aftermarket automotive parts and accessories, with 7,140 stores across the Americas. It offers a wide range of products, including parts for cars, trucks, and SUVs, as well as tools and equipment, and has strong customer service and extensive in-store resources, focusing on both DIY customers and professional mechanics.
The company saw a good FQ3 2024, with total sales increasing by 3.5%, where same-store sales were up 1.9%. Commercial sales grew 3.3%, and the company opened 20 net new commercial programs and now has commercial in 92% of the total domestic stores.
Although the domestic sales were flat this quarter due to delayed tax refunds and mild/cooler weather, domestic commercial sales still accounted for 31% of the total domestic auto parts sales. There was a 1% decline in DIY sales.
Despite hindrances in performance, the company was able to generate $4.24 billion in revenue, recording a 3.54% year-over-year improvement. The earnings per share were $36.69.
Key factors driving commercial sales growth include improved inventory availability, enhanced hub and mega hub coverage, the Duralast brand’s focus on quality, and technology advancements. Recent customer service initiatives are also expected to boost market share.
Therefore, the company remains optimistic about its future growth. Investors also remain positive, as 45 hedge funds hold long positions in the company as of June 30. $355,914,308 is the largest stake held by Holocene Advisors.
Autozone Inc. (NYSE:AZO) has a sincere focus on customer service, which it now refers to as “WOW! Customer Service,” to drive sales growth. Insiders currently own 0.2% of the company. In the past year, the share price rose 25.03%. With 2 instances from 1992 and 1994, the company might plan on a stock split soon.
RGA Investment Advisors made the following comment about AutoZone, Inc. (NYSE:AZO) in its Q4 2022 investor letter:
“Below is a chart of Alphabet’s (NASDAQ:GOOG) P/E ratio plotted against AutoZone, Inc. (NYSE:AZO). Any number of examples between large cap tech companies and more mature companies could illustrate this very same point, but we find this specific case most interesting because of its history.
Note that in late 2014/early 2015 these multiples crossed one another. The relative harmony between Alphabet and Autozone lasted for just shy of a year at that time, before Alphabet’s shares surged and Autozone’s shares slumped. This relationship need not matter for markets, though we think there is some signal for investors. Autozone today trades at the highest multiples of its recent history, while Alphabet trades at its lowest. Meanwhile, despite growth estimates dropping considerably at Alphabet and appreciating modestly at Autozone, Alphabet will outgrow Autozone by a wide margin over the next five years…” (Click here to read the full text)
