Amazon (AMZN) – Get Amazon.com, Inc. Report on Wednesday declared a 20-for-1 stock split, providing a highlight amid the equity market’s turmoil.
Amazon’s stock has risen since the move, including a 0.8% gain Friday. And if history is any guide, more appreciation may be coming.
Since 1980, S&P 500 companies that have declared stock splits have significantly outperformed the index for three, six and 12 months after the initial announcement, according to Bank of America research based on Bloomberg data.
The increase for the splitters’ stocks was 25% over the next 12 months, more than double the 9% climb for the S&P 500.
“Some of the outperformance is likely due to momentum,” Bank of America strategists led by Jared Woodard wrote in a commentary.
“Companies that announce splits have typically seen sustained market outperformance and expect that outperformance to continue.”
Of course, “Underlying strength in the company is a primary driver of elevated prices,” the strategists said.
“Once the split is executed, investors who have wanted to gain or increase exposure may start to rush for the chance to buy.”
Less Frequent Occurrence
To be sure, stock splits have dwindled in recent years. The past five years have seen only 28 splits, compared with the peak of 346 between 1996 and 2000, Bank of America said. The last major split announcement prior to Amazon’s came from Alphabet (GOOGL) – Get Alphabet Inc. Class A Report last month.
Amazon said it moved to make it easier for employees to manage their holdings of the stock and to make it more accessible to retail investors.
Amazon shares have the second highest price in the S&P 500 — $2,956. Homebuilder NVR (NVR) – Get NVR, Inc. Report leads the pack at $4,804.
Which Might Be the Next Stocks to Split?
So which stocks might be next to split? Bank of America published a list of S&P 500 stocks trading over $500. These stocks are logical candidates. They represent $5.7 trillion in market capitalization, or 15.5% of S&P 500’s total, according to BofA.
The list includes AutoZone (AZO) – Get AutoZone, Inc. Report at $1,878, Chipotle Mexican Grill (CMG) – Get Chipotle Mexican Grill, Inc. Report at $1,494, Tesla (TSLA) – Get Tesla Inc Report at $799, BlackRock (BLK) – Get BlackRock, Inc. Report at $695 and Costco Wholesale (COST) – Get Costco Wholesale Corporation Report at $528.
The next companies to split could be travel/restaurant reservation service Booking Holdings (BKNG) – Get Booking Holdings Inc. Report, AutoZone, Chipotle, Tesla, BlackRock, and auto supplies retailer O’Reilly Automotive (ORLY) – Get O’Reilly Automotive, Inc. Report, according to Barron’s.
Booking recently traded at $2,031 and O’Reilly at $681.
It’s possible a wave of stock splits will transpire, the Bank of America strategists said, “bringing more investors flows into the market, [thereby providing] support for embattled growth companies.”