• Alphabet (GOOG, GOOGL) conducts a 20-for-1 stock split on July 15.
  
• Small investors will then be able to buy more GOOG shares, but fractional shares are always an option before that.
  
• Investors shouldn’t wait until after the split to buy shares.

It’s been almost two months since Alphabet (NASDAQ:GOOG) announced that it would split GOOG shares on a 20-to-1 basis. On July 15, shareholders will receive 19 additional shares for every share held in the $1.8 trillion company. But, of course, Alphabet’s valuation will not change.

What will change is the number of shares outstanding. This figure will be multiplied by 20 to reach 13.2 billion against 661 million today. In addition, the stock price will drop to 15% of the closing price on July 14.

At the beginning of March, I suggested that Alphabet was finally going obtain a right of acquisition while purchasing Beggar (NASDAQ:MNDT) for $5.4 billion. This move adds immediate value to the company’s cloud business.

Alphabet remains one of the best tech stocks to own for the long term.

GOOG Stock would bring Dow Jones to life

One of the arguments put forward to justify the spin-off of Alphabet and other high-priced stocks is to be eligible for inclusion in the Dow Jones Industrial Index. The DJIA, unlike the weighted heading S&P500, is price-weighted. So the higher your stock price, the higher your weighting in the index.

Barrons published an article on March 10 that listed $100 as the sweet spot for admission to the Dow Jones. He pointed out that the 30 stocks in the index ranged in price, from UnitedHealth Group (NYSE:A H) in the high end around $486 and Intel (NASDAQ:INTC) at the lower end around $48.

Alphabet argued it was doing the split to do its part more accessible to retail investors. However, in the age of fractional shares, the need to do so has all but disappeared. There is no doubt: Alphabet is trying to make a name for itself in the Dow Jones.

As Barrons argued, it’s probably Alphabet and Amazon (NASDAQ:AMZN), which announced its 20-to-1 split on March 10, will enter the Dow Jones. They will replace Intel technology stocks and Cisco Systems (NASDAQ:CSCO), which have increased by 34% and 64% respectively over the last five years. Over the same period, GOOG and AMZN are up 233% and 282%, respectively.

Without a doubt, Alphabet and Amazon would animate the index that exists since 1885.

You don’t have to wait to buy Alphabet

Virtually all major online brokers offer fractional stock purchases these days. So you don’t have to wait to buy a small part of the business. But many analysts don’t seem to know, as a recent report from InvestorPlace William White on the Amazon stock split.

Morgan Stanley’s Brian Nowak likes this. He believes, as does Alphabet, that “this will open up the stock to a wider range of investors,” White wrote on March 10. the number of shares will accelerate the purchase.

The other two analysts White mentions like the split because it will increase share buybacks by the companies. Amazon buys back $10 billion as a result.

Obviously, none of these analysts have ever bought fractional shares. If they had, they would know that retail investors don’t care whether they buy one stock or 20 for their $2,700 investment. Their equity stake remains the same.

Yet, as Barrons said in February, other companies will rush to do the same to reach more so-called “retail” investors. It’s a total smokescreen by the Alphabets of the World – an opportunity to engage investors of all kinds.

Buying GOOG stocks on the downside

Alphabet’s stock price is down 3% year-to-date through March 24. Yet Generated Alphabet $67 billion free cash flow (FCF) in 2021, up 56.4% from a year earlier. Moreover, its FCF margin is 26% while its current FCF yield is 3.7%. This is high for a company that increases its FCF by more than 50% per year.

As I said in early March, Alphabet doesn’t make many big acquisitions — only seven of 246 have been for more than $1 billion. So the fact that it’s spending more than $5 billion on Mandiant suggests that it takes protecting its Google Cloud customers very seriously.

Most of its current valuation metrics are reasonable relative to its history. Trading at 7.3x sales and 24.2x earnings, these ratios are either equal to or below their five-year averages.

I like Alphabet as a long term play. If you’re thinking of buying GOOG stock, I wouldn’t wait until July to own it.

As of the date of publication, Will Ashworth had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.