Bonanza! There have been four eligible splits announcements since last month; it's been a long time since there has been such a list to analyze and choose from for our monthly Index update, explains Neil Macneale, editor of 2-for 1 Stock Split Newsletter.
Varonis Systems (VRNS), a security software company, just recently announced a 3 for 1 split. National Beverage Co. (FIZZ), a soft drink beverage company, announced a 2 for 1 split on 2/5.
Sherman-Williams Co. (SHW), a paint company, announced a 3 for 1 split on 2/3. And eXp World Holdings Inc. (EXPI), an on-line real estate brokerage, announced a 2 for 1 split on 1/21.
The fact that two of these splits are "3 for 1" tells me there may finally be a recognition by company boards of directors that their share prices are well above the sweet spot where a split is appropriate.
Sherman-Williams will be our selection for addition to the 2 for 1 Index this month. In spite of above average valuation numbers, with a PE at 32 and a price-to-book ratio over 15, our screening algorithm scored SHW well above the other candidates.
The compensating numbers include a good net profit margin, a good dividend growth rate, a good earnings growth rate, and good returns on equity, assets and investment.
All the above "good" numbers are well above industry averages. SHW has a Beta, a measure of volatility, more or less equal to the overall market but much lower than most of its peers.
I don't expect any big upside surprises here, but Sherman-Williams is a solid, profitable, old-time manufacturer of a product we all use, and I'm happy to include it in the 2 for 1 Index.
For those just getting familiar with the 2 for 1 procedure, the routine is as follows. Ideally, the Index is maintained at 30 positions with one stock added and one deleted every month.
At the same time, all positions are balanced to an equal weight. For this month, Brown & Brown (BRO) has reached the top of the portfolio ladder and will be deleted, while Sherman-Williams will be added in its place.
