There were six high-profile stocks that split their shares last year. Not surprisingly almost all came from the tech industry. This has led to the rise of stock-split stocks to buy.
After the impressive surge in technology stocks in 2021, several companies in the sector took advantage of their elevated share values to capitalize on them. In June 2022, Amazon (NASDAQ:AMZN) underwent a 20-for-1 split, followed by Shopify (NYSE:SHOP) with a 10-for-1 split. Later, in August 2022, Tesla (NASDAQ:TSLA) implemented a 3-for-1 split.
Despite the excitement created by a stock split, the true value of the event is zero. It’s literally a non-event. Instead of a $10 bill in your pocket, you’ve now got two $5 bills. Your pizza has been cut into 12 smaller slices instead of six big ones.
If stock splits are seemingly inconsequential, one might wonder why companies opt for them and why they often stir enthusiasm among investors. Several reasons underpin these actions, though none directly pertain to the stock’s inherent investment value. Firstly, after a split, a stock can appear more affordable to potential buyers. Secondly, such a move can boost a company’s liquidity. Additionally, splits can help a company meet specific stock-exchange listing requirements. Lastly, opting for a split can serve as a company’s way of conveying a bullish sentiment about its future.
So here are three stock-split stocks that you should be buying now.
Alphabet (GOOG, GOOGL)
Google search engine parent Alphabet (NASDAQ:GOOG, GOOGL) was one of the tech stocks splitting its shares last year, dividing them 20-for-1 in July 2022. Over the past 12 months, the owner of video streaming service YouTube saw its stock climb 23%, though they’re up 55% in 2023.
The main worry with Alphabet is it is an advertising-centric business whose operations would be severely hampered in a recession. A pullback in advertising dollars hits the bottom line hard.
For the first time since 2014, Google and Meta Platform‘s (NASDAQ:META) Facebook do not account for the majority of global ad dollars spent online. It sank to 48.2% in January, according to Insider Intelligence data, and is expected to fall to 44% by the end of the year. This also makes it one of those stock-split stocks to pay attention to.
Even so, Google still commands the largest share at an estimated 26.5%. And Alphabet is responding to the threat TikTok represents with its Shorts short-form videos. While the challenger only has a 2% share, it doubled in just one year.
Of course, Google still owns internet search. It remains the first place most people turn to when they want to find something. And Google has emerged as a viable and growing threat of its own in cloud-based services. It nearly doubled its market share to 11% between 2017 and 2022, and generated $8 billion in revenue last quarter, up 28% year over year.
Analysts expect Alphabet to continue to grow earnings at a better than 15% compounded annual rate for the next five years. There is plenty more growth to come where Alphabet stock is concerned.
Although warehouse club Costco (NASDAQ:COST) didn’t split its stock last year (the last split occurred in 2000), maybe it should. Shares trade for $560 a piece and cutting them in half or thirds would make it more affordable to more investors.
While buying fractional shares is a reality these days, many investors don’t realize they can and there is also a psychological barrier to the higher price.
But Costco is a stock to be buying hand over fist regardless. Although the warehouse club operates with a business model that relies upon low-margin, high-volume sales, rising costs pressure profits. That was partially the cause of its stock diving 20% last year. It’s up 23% in 2023 as inflation subsided, even if it remains elevated.
Most of Costco’s earnings are derived from its membership fees, which typically get raised every five or six years. Memberships are also a very high-profit margin stream. That helps the retailer remain very competitive on pricing. It can lower prices for consumers below that of its rivals because it makes up the difference in the fees.
Costco last raised its member fees in June 2017. It might hold the line a while longer because consumer wallets are still feeling pinched. CEO Richard Galanti told analysts in May, “At some point, we will (raise the fee), but our view right now is that we’ve got enough levers out there to drive business.”
When it does happen, though, it will give an immediate boost to Costco’s top line and help to drive profits higher. The stock will also follow suit. All in all, it’s one of those stock-split stocks to buy.
Novo Nordisk (NVO)
Danish biotech Novo Nordisk (NYSE:NVO) is splitting its stock on Sept. 20 at a 2-for-1 ratio. Investors would be well served buying shares either before or after. Its weight-loss dynamic duo Ozempic and Wegovy are the hottest things in medicine and the pills can’t be prescribed fast enough.
Novo Nordisk said it is the dominant maker of glycogen-like peptide-1 (GLP-1) therapies for diabetes and obesity. It has a 65% share of the market. Ozempic is tops with a 44% share while Wegovy was reintroduced into the U.S. market in January. Global sales for the pair were up nearly 50% in the second quarter.
The pharmaceutical stock is up 42% this year, 81% over the past 12 months, and has nearly tripled over the last three years.
There’s no difference if you buy the shares now or wait, but Novo Nordisk is a stock that should be in your portfolio.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.