Stock splits are all the rage this year. In the last month alone, there’s been a 10-for-1 stock split by Nvidia (NASDAQ:NVDA) and a 50-for-1 split by Chipotle Mexican Grill (NYSE:CMG), one of the biggest events in the history of the New York Stock Exchange. Earlier this year, Walmart (NYSE:WMT) split its stock 3-for-1. And chipmaker Broadcom (NASDAQ:AVGO) executed a 1o-for-1 split on July 15.
While it is true that stock splits don’t change the underlying fundamentals or valuation of a stock, they do make the shares more affordable, especially to retail investors. Broadcom’s stock traded on July 12 at $1,700 a share. Now it’s priced at $170. The lower price helps to explain why most stocks get a boost immediately after their shares split. Companies realize this, which is why they continue to split their stocks.
Here are three high-priced stocks ripe for a split and surge.
MicroStrategy (MSTR)
MicroStrategy (NASDAQ:MSTR) announced a 10-for-1 stock split on July 11. Sure enough, the company’s share price surged, up 7% on the news. The company, which is the largest corporate holder of Bitcoin (BTC-USD) in the world, said the shares will begin trading on a split-adjusted basis August 8. The split comes as MicroStrategy’s stock has risen more than 230% over the last 12 months to trade at $1,500 per share.
Once completed, the split will lower MicroStrategy’s share price to about $150 a share based on the current price. While technically a provider of enterprise software, MicroStrategy has switched its focus in recent years and adopted an aggressive Bitcoin-buying strategy. At the end of June this year, MicroStrategy owned 226,331 Bitcoin worth $13.30 billion based on the current price of the largest cryptocurrency.
Analysts at Bernstein recently wrote in a note to clients that MicroStrategy is “building the world’s largest Bitcoin company” and that the stock has an additional 80% upside.
Fair Isaac Corp. (FICO)
Fair Isaac Corp. (NYSE:FICO), the credit scoring agency behind everyone’s FICO score, looks like a good candidate for a stock split with its share price currently at $1,550 and trading near a 52-week high. The company’s share price has nearly doubled in the last year, including a 37% year-to-date gain. At more than $1,500 each, the shares are out of reach for many retail investors who might like to get their hands on them.
Fair Isaac has previously split its stock on four occasions. However, the last split occurred 20 years ago. Given the length of time since the last split, now would seem like a good time for Fair Isaac to make its stock more accessible to individual investors. The company’s share price has marched steadily higher on the back of strong financial results. Fair Isaac enjoys a near-monopoly over credit scoring in the U.S. These facts have made Fair Isaac one of the best-performing stocks of the last 10 years.
NVR (NVR)
Now for a company that has never split its stock, though it probably should. Home builder and mortgage bank NVR (NYSE:NVR) has been publicly traded since 1993, yet never split its stock. The result is that the company’s shares now trade at $8,000 each, putting them far out of reach for most investors. A split of the company’s stock would be a massive undertaking at this point, but would likely give the share price a boost.
Interestingly, NVR stock has continued to rise despite the sticker shock involved with its share price. Over the last 12 months, the stock has gained nearly 30%, including a 15% gain this year. And the stock is currently trading at a reasonable price-earnings ratio of 16 times future earnings estimates. The stock’s valuation is not out of whack despite the $8,000 price tag.
It’s worth noting that NVR is one of the few stocks that Warren Buffett bought over the last year. Buffett, of course, is famous for having never split the Class A shares of his Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) holding company. Those Class A shares of Berkshire now trade at an astounding $639,000 each.
On the date of publication, Joel Baglole held long positions in NVDA and FICO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in NVDA and BTC-USD.