Hundred-dollar stocks double as CEOs dismiss split decision

Price Agnostic

Those figures exclude exchange-traded funds, securities that track equity indexes and trade like shares throughout the day. The ETF industry has seen assets invested in stocks expand 56% since 2010 to $1.17 trillion, based on data from the Washington-based Investment Company Institute through June 30.

“If a lot of the equities are being held in some institutional intermediary, I don’t think the price is that critical,” Ernie Cecilia, the chief investment officer who helps oversee $7 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in an Aug. 7 telephone interview.

Exxon Mobil Corp. reached $95.20 last month, exceeding the level from the last split more than a decade ago. International Business Machines Corp. hasn’t done it since 1999, after its stock reached $246. In 1997, the Armonk, New York-based company split two-for-one when the shares hit $179.25. IBM traded at $187.53 yesterday.

Splits “do nothing” for shareholders, Apple Chief Executive Officer Tim Cook said in February 2012, in response to an investor question. Cupertino, California-based Apple became the world’s largest company in January 2012, and its stock rallied to a record $702.10 by September 2012, bringing the market value to more than $650 billion.

Cheaper Stocks

“Retail investors in general don’t really understand that it doesn’t really matter if a stock has been split,” Brett Bartman, a Beverly Hills, California-based senior vice president -- financial adviser at RBC Capital Markets, said in a telephone interview. His firm oversees $1.2 billion. “They seem to still view a stock that trades at $5 or $10 as being a cheaper stock than a stock trading like Apple, which is not the case at all.”

Investors are increasingly surrendering stock selection to fund managers and ETFs. More than $38 billion went into U.S. ETFs last month, the fourth-highest inflow ever, as the S&P 500 climbed to a record, according to data since 2000 compiled by Bloomberg. Almost $30 billion of the deposits went to funds that buy and sell American equities.

ETF Expansion

“If I want immediate and broad exposure to a sector, the ETF lets us get in there immediately and get it done,” Richard Saperstein, a managing director and principal who helps oversee about $8 billion at HighTower Advisors LLC’s Treasury Partners in New York, said in an Aug. 1 phone interview.

Concern about future economic growth and memories of the 2008 financial crisis and volatility in 2011, when equity swings approached records, may be keeping executives from reducing share prices, according to Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc.

“There’s been so much volatility, managements have been hesitant to split their stocks,” Teal said in a telephone interview from Raleigh, North Carolina. “They’re unsure if an economic downturn could follow or more global uncertainty could unfold, so they don’t want to do splits right now.”

Stocks that split shares since 2011 have performed about the same as the S&P 500 during the three months since the action, according to data compiled by Bloomberg. The median company rose 6%, compared with a 4.5% gain for the benchmark gauge.

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