Are High-Priced Shares Truly 'Hot?'
When I started in this business way back in the 1990s, a stock split was the "sure" sign of gains to come. Tech stocks were starting their decade-long run and growing rapidly, and their prices were on the rise. It was a badge of honor to split your stock: It meant the company had done well so far, and signaled it was likely to continue to grow rapidly. Despite the protestations of efficient market theorists, stocks often jumped on the announcement of a split, even though they should not -- in theory. The market believed in the signaling value of a split.
A funny thing happened after the bubble burst in 2000 to 2003. With many hot tech stocks down 90% or more, and now languishing in penny-stock land, splits went out of favor. Aside from the risk of setting up the stock for penny status if things went wrong, management teams were noticing that Berkshire Hathaway (BRK.A) and a few other extremely high-priced stocks were the only ones commanding respect -- and a respectable price....515 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.
Already a Subscriber? Please login.