Is Stock Split Always Beneficial to Traders and Investors?

If you have read my latest article on Integrated Industries focusing on its Stock Split I would request you to read the article below. I am bringing this to this blog as my responsibility towards new traders. Because, stock split is generally considered as hugely beneficial to traders.This article can be treated as an eye opener as to whether it\’s always true.

 Analysis
of Stock Split Data

Through
this analysis I
try to examine whether it’s true that stock split is always
beneficial for investors and traders. Before drawing any conclusion I would like you to go
through the table below which is constructed on recent stock split carried out by a few listed companies in India. 

Effect of Stock Split on Stock Price
Srl No.	Name of Company	Date of Stock Split	Price on Split Date (Rs.)	Highest/Lowest Price since split date (Rs.)	Date of Highest/Lowest Price Since Split date	Approx. Annualized %age profit	No. of days
1	Pearl Global	4th Jan 2024	689	1088	22nd Aug 2024	91.11	232
2	Nestle	4th Jan 2024	2711	2755	26th Sept 2024	2.22	267
3	Cochin Shipyard	9th Jan 2024	669	2863	11th July 2024	647.04	185
4	Franklin Industries	10th Jan 2024	1.59	4.13	28th May 2024	416.49	140
5	Trishakti Industries	15th Jan 2024	36.52	140	27th Sept 2024	402.43	257
6	Dolphin Offshore	15th Jan 2024	1830	632	27th Sept 2024	-92.97	257
7	Growington Ventures	30th Jan 2024	18.62	4.69	27th Sept 2024	-112.84	242
8	S.G. Mart	21st Feb 2024	574	425	27th Sept 2024	-43.07	220
9	Remedium Lifecare	22nd Feb 2024	32.35	8.89	27th Sept 2024	-120.87	219
10	Tiger Logistics	1st March 2024	72.62	60	27th Sept 2024	-30.06	211
11	Capri Global Capital	4th March 2024	241	289	5th May 2024	115.39	63
12	Manorama Industries	6th March 2024	415	883	22nd Aug 2024	242.13	170
13	Sun Shine Capital	6th March 2024	3.69	2.06	27th Sept 2024	-78.27	206
14	OK Play India	8th March 2024	18.28	13.85	27th Sept 2024	-42.53	208
15	Waaree Renewal Tech	14th March 2024	1340	2990	7th May 2024	817.16	55
16	Refex Industries	21st March 2024	145.75	573.75	27th Sept 2024	561.17	191
17	Lorenzini Apparels	27th March 2024	406	28.84	27th Sept 2024	-183.28	185
18	Persistent System	27th March 2025	4049	5437	27th Sept 2024	67.63	185
19	Dhatre Udyog	27th March 2024	22.6	25.87	19th April 2024	220.05	24
20	Cupid Ltd.	3rd April 2024	117	133	10th April 2024	713.06	7
21	Bodhi Tree Multimedia	4th April 2024	18.41	12.11	27th Sept 2024	-70.57	177
22	Sprayking	10th April 2024	22.78	13.45	27th Sept 2024	-87.42	171
23	Suratwalla Business Group	16th April 2024	19	104	27th Sept 2024	989.63	165

Analysis of Stock Split Data Given Above

Key Observations:

• Performance Variability:

  • Positive Returns:Many companies have shown significant price appreciation after stock split. Examples include Suratwalla Business Group (989% annualized return), Waaree Renewal Tech ( 817% annualized return) , Cupid Ltd. ( 713% annualized return), Cochin Shipyard ( 647% annualized return) and Refex Industries ( 561% annualized return) with robust annualized gains post stock split.
  • Negative Returns:Conversely, several companies have experienced price declines, such as Dolphin Offshore, Growington Ventures, and Remedium Lifecare.As high as 10 out of 23 stocks lost heavily post stock split , almost half of them losing.
  • Short-Term Fluctuations:Some stocks have experienced short-term volatility, with prices initially rising and then falling.

• Time to Recovery:

  • Quick Gains:Some stocks, like Cupid, Dhatre Udyog and Waaree Renewable have seen rapid price growth after the split.
  • Delayed Recovery:Others, such as Dolphin Offshore and Growington Ventures, have taken longer to recover or have yet to do so.
  • Short-Term Fluctuations:Some stocks have experienced short-term volatility, with prices initially rising and then falling.

• Split Date Impact:

  • There\’s no definitive relationship between the split date and subsequent performance. Companies that split earlier or later have shown both positive and negative results.

• Industry Trends:

  • The available data doesn\’t explicitly break down performance by industry.

Potential Factors Influencing Performance:

• Company Fundamentals:

  • Strong financial performance, growth prospects, and market demand can drive stock price appreciation, regardless of a split.

    • Market Sentiment:

      • Overall market conditions, investor sentiment, and economic factors can impact stock prices.

      Split Signaling:

      • • • A stock split might signal a company\’s confidence in its future or make its shares more accessible to smaller investors. However, this doesn\’t guarantee positive performance.

      Conclusion:

      While stock splits can be a corporate action and corporate strategy to increase liquidity and affordability, their impact on stock price is not guaranteed. The performance of a stock post-split depends on various factors, including company-specific fundamentals, market conditions, and investor sentiment. It\’s essential to conduct thorough research and consider multiple factors before making investment decisions.