3 Monster Warren Buffett Stock Splits to Buy Right Now
Warren Buffett said he would never part ways Berkshire Hathaway Stock. With the company’s Class A shares recently hitting an all-time high and trading at around $527,400 each, that might come as a surprise. However, the Oracle of Omaha said it sees no reason to pursue stock splits as they do not increase intrinsic value, and Berkshire’s Class B shares are already available at a much higher price. low.
On the other hand, there is no denying that leading companies have seen significant gains in their stock prices after announcing and carrying out stock splits in recent years. With that in mind, a panel of Motley Fool contributors have identified three stocks in Berkshire Hathaway’s portfolio worth buying that are either set to split in the near future or stand out as a contender. potential for splitting.
Read on to find out why they think buying Amazon ( AMZN 0.34% ), HR (HR -1.70% )and Chevron (CLC 0.85% ) right now would be a smart move.
This technology leader will continue to dominate
Keith Noonan (Amazon): With Amazon shares having skyrocketed around 22,000% over the past 20 years, its current price of over $3,250 per share may seem a little unwieldy. That’s not to say the stock seems unfairly priced.
The company’s growth drivers continue to look incredibly strong, and its price-to-earnings (P/E) and forward price-to-sales (P/S) ratios aren’t far off historic lows. of the company. However, the 20-to-1 stock split the tech giant will likely complete in June could have the effect of making the stock much more attractive to retail investors.
While many brokerages now allow the purchase of fractional shares, there is significant psychological appeal created by splitting shares at more manageable prices. There’s just something about owning a full share that’s more appealing than owning a small slice of a share, even if the actual value of that stake is exactly the same.
As Buffett hinted, Amazon’s upcoming stock split won’t do anything to directly increase the company’s intrinsic value. However, there could be indirect benefits that end up working to the company’s advantage.
Despite Amazon’s incredible performance over the past two decades, the stock’s gain of around 6% over the past year has lagged behind the gains of the S&P500 and Nasdaq Compound index. If a stock split helps boost the company’s stock price, it could help keep stock-paid employees happy.
Should You Buy Amazon because of its stock split? It’s not the sort of thing that even comes close to being the focus of my purchase thesis when the tech giant’s leadership in e-commerce and cloud services and its incredible penchant for innovation are so important. However, it also wouldn’t be shocking to see this move create a bit more excitement for what remains an incredibly exciting undertaking.
Glitz and glamor
Daniel Foelber (HR): Warren Buffett has always had a thing for retail since he worked at the Buffett & Son family grocery store as a kid in Omaha, Nebraska. But the high-end nature of RH, formerly known as Restoration Hardware, is nothing like a folksy local store.
RH is glamorous and wild. Each store uniquely incorporates architectural features appropriate to its environment. The company has been recognized for its design and showmanship. He even has a yacht business. The luxury yacht RH3 will soon be available for charter in the Mediterranean and the Caribbean. And RH1 and RH2 are not yachts, by the way, they are private jets that can also be chartered.
RH owns stores that double as restaurants and wine bars. Simply put, it tries to be a brand that has almost nothing to do with Buffett’s humble lifestyle. So why would he be interested in such a glamorous undertaking? Well, it probably comes down to valuation.
HR’s sales and net income have grown at skyrocketing rates over the past few years.
Couple that growth with a more than 55% drop in the stock price and you have a value stock that looks inexpensive. In fact, RH now has a P/E ratio of just 14.5.
On March 29, RH issued a press release announcing its goal of executing a 3-for-1 stock split:
The Company believes that a stock split is appropriate given the substantial appreciation in the share price since the 2012 IPO. Although a stock split does not change the value of the Company , we believe a split should have a number of benefits, including recruiting and retaining talent. The stock split is expected to be executed in the spring.
RH is a bold company that has no problem taking risks and spending money to build its brand. Its results speak for themselves. A retail store, a winery, and a yacht and private jet company may sound unconventional, but it works.
It’s time to adapt to the unexpected
James Brumley (Chevron): I know that’s not a name that many people have suggested for a possible stock split lately. But I have a feeling that oil giant Chevron might be on the verge of making such a move.
Like most energy stocks, Chevron shares all but disappeared off the radar following the oil crash of 2015. They also remained low profile until late last year when oil demand s suddenly straightened out, but not the offer. Along with the highest crude prices we’ve seen in years, shares of Chevron are up more than 40% since November, hitting record highs. The context of geopolitical tensions also leads me to believe that oil prices will remain high in the indefinite future.
The thing is, it all happened so fast – faster than even Chevron and its peers could have predicted.
Those familiar with the company’s history may recall that it does a very good job of dividing its shares as needed to keep its price and trading manageable for the average investor. It hasn’t seemed necessary to do so since 2004, as stocks have been rather tame most of the time since then.
However, with the extreme price appreciation we’ve seen in the past five months alone, it’s arguable that this one is overdue for a price adjustment that will make the title a little less daunting.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.