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- There is a lot of discussion around alphabetical (GOOG) stock split in the third quarter.
- Market health and earnings should be GOOG’s trading and holding points.
- Bullish long-haulers in GOOG stocks can hedge smartly to build up on weakness.
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Hot inflation. Consumers at risk. Earnings. Supply chain disruptions. A stalled global economy. These are investment considerations inexorably linked to today’s stock market. Yet amid these mostly bearish fundamentals, the financial media can’t get enough of discussing upcoming stock splits, including alphabetical (NASDAQ:GOOGNASDAQ:GOOGL) stock split. And for seemingly good reasons too.
With You’re here (NASDAQ:TSLA), Shopify (NYSE:STORE), Amazon (NASDAQ:AMZN) and GameStop (NYSE:EMG) in mind, there are four big reasons to care about stock splits. The fifth is that despite zero profit for the company’s business and in theory, stock splits have historically added value to stocks and helped them outperform.
This brings us to Alphabet. During the tech giant’s fourth quarter earnings call, GOOG management announced board approval for a 20-for-1 stock split on July 15.
It is important to note that the overall performance of stocks surrounding a split does not take into account more under pressure and still inflated stock market valuations like that of the current market. Additionally, we’re still a full three months away from completing the split, but there are more pressing developments in GOOG stocks that should help or keep investors salivating over the Alphabet stock split.
There’s more than just a GOOG stock split to consider
While investors may be dogmatic about the importance of buying GOOG stock for this summer’s stock split, Will Ashworth of InvestorPlace noted a much bigger announcement for Alphabet stock, which is already working hard to provide shareholder value.
Yesterday, Alphabet CEO Sundar Pichai announced that the tech giant would invest $9.5 billion in its US offices and data centers this year. The decision should result in the creation of 12,000 new full-time jobs. If history is any indicator, this news should mean a lot more to GOOG stock investors than a stock split.
As Will cleverly explains, creating jobs like Alphabet’s is one of the best indicators of a growing business. And that bodes very well for the company as it looks to the future and the longer-term performance of GOOG’s stock.
Also, closer to today’s action, Alphabet investors have earnings forecast for April 26 to clear the air. Last quarter’s report was a huge financial success for the company. It also offered an astonishing nearly 10% price jump to all-time highs on the immediate heels of the report.
Bears also have a say in what matters
Source: Charts from TradingView
An important determinant of stock performance, especially for heavily weighted stocks like GOOG, is the market itself. So during corrective or more bearish cycles, earnings, stock splits, and even smart investments are usually going to be called into question (if not thrown under the bus).
And let’s just say the signs of an aggressively priced, if not downright frothy, stock market are there, so there’s potential for a bigger bear cycle to come.
Additionally, today’s price chart for GOOG stocks warns that a market rally after the March correction rests on a shaky base. Technically, stocks are approaching a fifth sideways support challenge located just above a classic bear market signal defined by a 20% correction. It’s troubling.
Conclusion on GOOG Stocks
Should investors expect holding GOOG stock in 2022 to be a good idea given Alphabet’s impending stock split? As discussed above, it’s not that simple. In fact, buying the stock for this reason sets you up for disappointment.
Investors could take a chance and buy GOOG with a stop-loss just below chart support as stocks enter a bear market. But today, profit risk also exists. The bullish investors who held the event did well last time around, but only briefly. Plus, they’re underwater right now. This offers further proof that they are not playing with riskier market conditions.
Ultimately, I love Alphabet’s Google and YouTube search as much as the next person. But even Peter Lynch might balk at today’s riskier proposition to “buy what you know,” even if you like those products.
If investors simply can’t be persuaded to exercise restraint, as a core portfolio, a GOOG stock necklace can make accumulating additional weakness a much easier investment strategy.
As of the date of publication, Chris Tyler had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.
The information offered is based on the observations of Christopher Tyler and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related thoughts, follow Chris on Twitter @CAT_Options and StockTwits.
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