3 High-Priced Stocks That Should Split – Will They?

News of stock splits creates a strange phenomenon: share prices go up, even though the value of the company doesn’t change. When stocks split, they are simply divided into more shares at a lower price. Added together, their total value remains the same.

Nonetheless, investors get excited over stock split announcements – perhaps because they suggest the underlying organization is poised for growth.

Stock splits can achieve a variety of objectives, including making shares more affordable for retail investors. In the case of industry leaders like Alphabet (Google) and Amazon, the lower per-share price may pave the way for the companies to be added to the prestigious Dow Jones Industrial Average.

Investors closely monitor the potential for splits on particularly high-priced stocks because of that tendency to push share prices up. Aside from Alphabet and Amazon, the list of high-priced stocks includes the following companies:

• AutoZone Inc. – Approximately $1,985 per share
• Berkshire Hathaway (Class A) – Approximately $482,780 per share
• Booking Holdings Inc. (Priceline) – Approximately $2,185 per share
• Chipotle Mexican Grill Inc. – Approximately $1,370 per share
• Markel Corp. – Approximately $1,340 per share
• NVR Inc. – Approximately $4,475 per share
• Seaboard Corp. – Approximately $3,935 per share

Some high-priced stocks are off-the-table when it comes to stock splits. For example, Warren Buffett has a long-standing policy to leave Berkshire Hathaway Class A shares alone, though Berkshire Hathaway Class B shares have split. However, others on the list have no such policy.

Will companies like Booking Holdings, NVR, and Seaboard announce a stock split in 2022?

What Does Booking Holdings Own?

Booking Holdings is a leader in the online travel industry, and it owns a variety of subsidiaries that focus on discount and value pricing. Its most popular e-travel sites include Agoda, Booking, Kayak, OpenTable, Priceline, and RentalCars.

The genius of Booking Holdings’ strategy is that these sites aren’t truly in competition with each other. Though they may overlap in terms of product offerings, each has a distinct set of users and a unique geographic footprint.

The company’s history can be traced back to 1997 when the founders of Priceline changed the face of travel forever. They knew that planes often flew with up to a third of their seats empty, and hotel rooms all over the world went unbooked each night. Priceline matched the unsold seats and beds with last-minute discount-minded travelers, creating a win for both sides.

Over time, the underlying process that drove Priceline changed, but its reputation as a discount travel leader did not. In 2014, after many acquisitions, Priceline changed its name to The Priceline Group. In 2018, it rebranded as Booking Holdings.

Booking Holdings has never had a stock split under any of its names, though it did complete a reverse stock split in June 2003. Though the company has given no indication that it plans a stock split in the near term, a resurgence of travel may push Booking stock prices up so far that a stock split is the only reasonable course of action to maintain liquidity and trading volume.

As a bonus, statistically speaking, a lower nominal price would increase the likelihood of above-average returns for shareholders.

Is NVR Stock A Buy?

If Berkshire Hathaway Class A shares are taken out of the running, NVR is the most expensive stock on the market from a per-share perspective.

At its current price, it is nearly twice as costly as Alphabet and Amazon pre-split, yet it hasn’t taken action to bring the per-share price down like its tech peers.

Why?

It’s hard to say. The most likely reason is that a high stock price and low trading volume make NVR stock unappealing for speculators, so NVR stock avoids much of the volatility experienced by lower-priced peers.

NVR was founded in 1980 with a singular purpose: to build beautiful homes. And it has done exactly that, expanding its footprint to include 15 states and 35 metropolitan areas. It now offers mortgage banking and title services, which ensures that it can manage the home buying experience from start to finish for each of its clients.

Paul Saville led the company as CEO from 2005 until March 2022. He then handed the title over to Eugene Bredow, though he is staying on as Executive Chairman if shareholders agree. The two have worked closely together since Bredow started with NVR in 2004, and they see eye-to-eye on many things – but perhaps not all.

Since its IPO in November 1993, NVR stock has never split. However, under Bredow it is possible that a change in strategy is coming. After all, interest rates are on the rise, and that is likely to dampen demand for new home construction. A lower nominal stock price via a stock split could be just the thing to attract new investors.

In the meantime, split or no split, is NVR stock a buy? Maybe not quite yet.

Economic conditions are uncertain, and companies focused on construction and mortgage lending may be the first to suffer in a recession. NVR stock is likely to go down – at least a bit. When it does, it will be time to buy NVR stock.

Will Seaboard Stock Split?

After Berkshire Hathaway and NVR, Seaboard is next when it comes to high-priced stocks. Like both of those companies, Seaboard has never split its stock.

On the surface, that seems somewhat surprising for a conglomerate that dabbles in everything from hog production and pork processing to transporting commodities. However, a deeper dive into Seaboard’s history – and a look at its current shareholders – gives insight into the company’s split-free strategy.

Seaboard was founded in 1918 by Otto Bresky, and it was a privately-held family business for decades. In 1959, it went public as a result of merging with a publicly-traded company. That’s a bit different from planning and executing an initial public offering (IPO).

Though Otto Bresky retired from all company responsibilities in 1973, there have been one or more Breskys serving in some leadership capacity ever since. One might argue that the family was never interested in trading on public exchanges, and it prefers to maintain a family-owned feel though outside investors have access to buy Seaboard stock.

The Bresky family owns more than 75 percent of Seaboard stock, and there is no real incentive to initiate a stock split. The family isn’t especially interested in attracting new investors, and the relatively new CEO, Robert Steer, who took the top position in 2020, hasn’t said anything to indicate that he plans to persuade them differently. For now, there is no reason to believe that Seaboard stock will split.

Stock Splits: The Bottom Line

Though stock splits tend to drive up share prices, the split itself doesn’t add value to the company. Instead, it is investors’ reaction to the split, both upon announcement and after completion, that gives the impression that stock splits deliver returns automatically.

While rising share prices frequently come with stock splits, there is no guarantee that this will occur in every case. As with any trade, examining business fundamentals is a must before you buy.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.