Thursday, August 1, 2013

The Cognex stock split

Around the same time the Q2 and first half results came out, Cognex also announced a two-for-one stock split.

Interesting decision. Why would they do this?

Well my reading suggests the idea is to make the stock more attractive to small investors. As such, a stock is often split after a big run up in price. And Cognex has certainly seen that recently, as this chart, lifted from Yahoo finance, confirms.

(The red line is the performance of the NSADAQ over the same last six months.)

There’s also a school of thought that says the sum of parts will be greater than the whole after a split, perhaps because the lower price makes it more attractive to small investors, or because it’s seen as a sign of confidence, or possibly both.

I do have to wonder though if there’s a link to the decision to pre-pay dividends last year. A kind of “here’s a crumb” for the investors. (Although you’d think the capital growth would put a smile on their faces.)

And then there’s the question, in my mind anyway, of what caused the run up in the stock price at the beginning of July. Did I miss some especially significant news about Cognex?

Guess I’ll just have to wonder.

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