Published on: August 14, 2020

What a difference 7 days makes.  Last week we were basking in glorious, ground-cracking sunshine; today, drizzle and murk.  But let’s not let that put the dampeners on our weekend, welcome to this week’s News, Views and Truths.

The interesting news this week was the announcements made by arguably two of the market’s most popular companies; Apple and Tesla.  They both announced their intention to split their stock, which does exactly what it sounds like it does.  One share gets split up into multiple shares, with no change to the total value of investors’ holdings; they are simply broken down into more individual units.  Apple announced a 4 for 1 split, whilst Tesla announced a 5 for 1 split.

As a result, their respective shares prices rallied strongly, an indication that the market found this to be a positive event.  But why do it in the first place?  

The bottom line is that the current share price for each stock is high, possibly prohibitively high for the general public.  As at close of business yesterday, Apple is trading at $460.40 per share, with Tesla trading at a whopping $1621.00 per share.  Based upon the announced splits and those prices, Apple will reduce their price to $115.10 and Tesla to $324.20; much more accessible for the DIY investor and this, therefore, should increase demand.

So what does history say will happen next?  Currently, history says both stocks are acting just like companies that have announced splits should; Tesla’s stock gained 13% on Wednesday, while Apple has climbed 17% since its announcement.  During the past five years, companies that announce a stock split have averaged a 2.3% gain between the announcement and the actual split, with more than 68% outperforming the S&P 500, according to Bespoke Investment Group data. 

However, it’s a different story after the split. The average stock has fallen 0.3% after the split occurred, with just 29% beating the S&P 500.  Over the following year, they’ve averaged a 9.8% gain with just 47.8% outperforming the S&P 500.

It certainly will be interesting watching the fortunes, both leading up to and after the split.  Tune in for more updates…

This week’s “When Andrew Met…” video is on the website here with an update from Margaret Lawson, manager of the SVM UK Growth fund which is the newest addition to our CORE portfolios.  Margaret updates us on the changes both to her fund and the UK market, with an outlook on the changing face of UK Equities.

Once again, my weekly podcast is also live here, with this week’s guests being Martijn Rozemuller and Dominik Poiger of Van Eck who outline the investment opportunities within Video Gaming and E-Sports.  A gamer myself, this is a fascinating and fast-growing investment theme which is becoming more and more prevalent within investment portfolios.

That is it for this week…  Stay safe, stay dry and I shall see you all next week.

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