We recently published a list of the 12 Stocks to Buy That May Be Splitting Soon. In this article, we are going to take a look at where KLA Corporation (NASDAQ:KLAC) stands against other stocks that may be splitting soon.
Stock splits change the number of outstanding shares of a company, but not the company’s overall value. A forward split makes each share cheaper and easier to buy. Splits can range from 2-for-1 to 100-for-1 or more. In a 2-for-1 split, one share becomes two by cutting the price in half. For instance, a $100 share becomes two $50 shares. This makes shares more affordable and attracts more investors. Even though the price per share drops, the total value held by shareholders stays the same. So, splits don’t change who controls the company. The main reason for a split is to make the stock more appealing, or accessible for retail investors.
Uncertainty is Driving Selloff
Dan Suzuki, Deputy CIO at Bernstein Advisors, joined CNBC’s ‘Squawk on the Street’ on March 14 to share his perspective on the recent persistent three-week downtrend in the indexes during an interview. He explained that the sell-off is largely driven by uncertainty and its negative impact on sentiment. According to Suzuki, analyzing market movements reveals that the stocks that rallied most after the election until mid-February have seen significant declines since then and create a mirror image effect. Additionally, the most expensive and high-beta stocks have been hit hardest as the market prices are in an uncertainty risk premium. These dynamics are central to what is driving markets currently. Despite this, Suzuki noted that hard economic data remains strong and suggests that relief from headline uncertainties could reduce the risk premium.
Suzuki noted concerns over soft retail sales and spending figures, which might be due to weather or seasonal factors. However, he highlighted resilience in weekly retail sales and strong leading indicators. Prolonged uncertainty could still impact growth. Suzuki linked consumer trends to disappointing corporate guidance and persistently high inflation, which affected sentiment. He also pointed out the wealth effect caused by a stock market decline of 10% or more, particularly for investors in crowded names. Markets are adjusting to persistent uncertainty, which will continue even with relief anticipated within the next month or two, which will prevent a return to the high multiples seen in 2020-2023.
In an uncertain market with heightened risk premiums, companies considering stock splits may need to weigh the potential benefits against the backdrop of overall market sentiment. The ongoing economic uncertainty and changes in consumer behavior might impact how companies approach decisions about stock splits, especially if they are concerned about maintaining investor confidence in a volatile market. With that being said, we’re here with a list of the 12 stocks to buy that may be splitting soon.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top stocks that were trading over $400 as of March 17. We then selected the 20 stocks with high surges in their share prices in the past 5 years and a history of stock splits. From that, we picked the top 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A technician installing a complex of microcontrollers and internet of things devices inside a server rack.
KLA Corporation (NASDAQ:KLAC)
Share Price as of March 17: $713.00
Surge in Share Price in 5 Years: 525.33%
Stock Split Confirmed: No
Number of Hedge Fund Holders: 58
KLA Corporation (NASDAQ:KLAC) designs, manufactures, and markets process control and yield management solutions for the semiconductor and electronics industries. It operates across three segments that provide inspection, metrology, and process control tools, as well as wafer processing technologies. These segments serve the semiconductor, PCB, display, and packaging markets.
The company’s Process Control segment saw a 12% year-over-year revenue increase in 2024. This segment provides vital inspection tools for semiconductor manufacturing. It is driven by the demand for advanced technologies like AI and high-bandwidth memory. In 2024, advanced packaging revenue alone hit ~$500 million and is projected to exceed $800 million in 2025. This segment is crucial because it addresses the growing complexity of chip production. The company’s tools help customers manage intricate designs and larger semiconductor devices.
On January 31, Deutsche Bank raised the company’s stock target to $850 from $725, while maintaining a Buy rating. The bank cited the company’s solid revenue growth for this sentiment, which was driven by high-bandwidth memory and leading-edge spending. Analysts predict that KLA Corp. (NASDAQ:KLAC) will outperform peers due to increasing semiconductor manufacturing complexity.
KLA Corp. (NASDAQ:KLAC) is seen as a strong long-term investment despite short-term China demand concerns, due to its inherent advantages and growth potential in other regions. Parnassus Core Equity Fund stated the following regarding the company in its Q4 2024 investor letter:
“We also added several new positions, including two in Information Technology: Workday, a category leader for enterprise cloud applications for finance and human resources, and KLA Corporation (NASDAQ:KLAC), a leader in semiconductor process control. KLA, a leader in semiconductor process control, benefits from inherently high switching costs, structurally higher demand for advanced semiconductors and increasingly complex semiconductor manufacturing. The company has a strong management team that is positioning it well for long-term growth. Concerns about weaker demand in China have impacted KLA’s stock price recently, but we believe the secular growth in other regions could offset the risk in the longer term.”
Overall, KLAC ranks 9th on our list of the stocks that may be splitting soon. While we acknowledge the growth potential of KLAC as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KLAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.