Split Expert Picks Trex Over Apple and Tesla

08/21/2020 5:00 am EST

Focus: BONDS

Neil Macneale III

Editor, 2 for 1 Stock Split

The big news in the world of splits was, of course, the recent declaration by Apple (AAPL) of a 4 for 1 split, effective 8/31, notes split expert Neil Macneale, editor of 2 for 1.

And, on 8/3, Trex Inc. (TREX) announced a 2 for 1 split effective 9/14. Then, Tesla Inc. (TSLA) piled on and announced a 5 for 1 split, effective 8/28. Let’s hope this is a signal the drought in stock splits is coming to an end. So, what to do?

My first instinct was to add two companies to the Index; however, in going over the fundamentals, I’ve concluded that TREX is the better choice at this point in time.

I love Apple. I’m typing my newsletter on my trusty Apple MacBook and taking calls on my super cool iPhone. I want to have the stock in the 2 for 1 Index, but I have decided to wait and see if I can get it at a better price in a month or two after the excitement over the earnings and split announcements dies down a bit. Stay tuned.

As for Tesla, I think the company makes great cars, but wow, this stock is in such a speculative bubble, I would be breaking all my rules to even consider it for the 2 for 1 Index.

Therefore, I am adding TREX to the 2 for 1 Index. The company was one of the original manufacturers of the composite decking that has become the popular alternative to wood for outdoor decks and railings.

Its decking is made primarily from recycled plastics and makes so much sense as concern for the environment becomes more and more widespread. The stock is not a bargain, with a PE ratio in the 40’s, and the company does not pay a dividend, definitely not to my liking.

However, with earnings growing at over 30%/year over the last five years, it’s understandable why the PE is where it is, and the good news is TREX is quite profitable with great returns on investment, equity, and assets.

The company has no long-term debt indicating a super conservative approach to business that should reward us over the next few years. In summary, Trex, Inc. will be added to the 2 for 1 index.

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