This is about to change.
The split, which takes effect on Monday, will be a 20-for-1 transaction, which means if you own one Amazon share, you’ll end up with 20 shares after the split that each cost about 1/20 of the previous price. So the value of your investment doesn’t change, and an Amazon stock that’s trading for just under $2,450 will become 20 shares each costing just over $120.
But here’s the thing: even though a stock split might lead to it It seems Like the stock is now more affordable, it doesn’t make the stock cheaper when looking at valuation metrics like price-to-earnings or price-to-sales ratios.
That’s why accessing stock prices for four-figure stocks is a “smart move,” according to Michael Mulaney, director of global markets research at Boston Partners. This would allow more investors to buy so-called round contracts (100 shares) of a company rather than just a handful of shares.
“Retail investor trading has increased dramatically over the last year and a half and is becoming very important again. It’s not just the big institutions and hedge funds,” Mulaney said. “But it is impossible for the average investor to buy 100 shares of some of these stocks at these prices.”
This prestigious group of 30 leading American companies is a price weighted rather than a market capitalization weighted index. Therefore, according to their current stock prices, Amazon and Alphabet cannot be added to the Dow without having a significant impact on the daily movements of the index.
So looming splits between Amazon and Alphabet could pave the way for these tech giants to join Apple and Microsoft, the only two US companies with a higher market capitalization than Amazon and Alphabet, in the Dow.
Inflation finally peaking?
Big tech stocks aren’t the only things with inflated prices. Consumers and businesses have coped with higher prices for goods and services over the better part of the past year. Investors will get another look at how prices will rise when the US government releases its latest Consumer Price Index (CPI) numbers on Friday.
However, it may take some time for consumer prices to reach a level that is more comfortable for shoppers…and the Federal Reserve. The Fed would ideally like to see the CPI slow to around 3% to 3.5%, if not lower, before the announcement. a Victory over inflation.
“The good news is that inflation numbers should start to fall,” said Ken Shinoda, portfolio manager at DoubleLine. “The question is will they come down enough?”
next one
Monday: Amazon stock split. Apple’s Worldwide Developers Conference kicks off.
Friday: Bank of Russia meeting on interest rates; US Consumer Price Index; Consumer confidence in the University of Michigan in the United States
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