The last weeks of August brought us three split announcements to consider as an addition to our model portfolio that is comprised exclusively of stocks that have announced stock splits, explains Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
The first was First Savings Financial Group (FSFG) with a 3 for 1 split that was just delivered. FSFG has good numbers and might be a good fit if someone is building a micro-cap portfolio, but trading is too thin to qualify this small Illinois bank for the 2 for 1 Index.
Microchip Technology Inc. (MCHP) was the next announcement, with a 2 for 1 split coming in October. MCHP is overvalued in my opinion. It's a fairly volatile stock and its earnings have actually declined over the last five years, making the 90+ PE ratio hard to justify.
That leaves us with Raymond James Financial (RJF), which has just undergone a 3 for 2 split. Raymond James is a broker and money management firm providing services similar to Morgan Stanley (MS) and Charles Schwab (SCHW).
However, Morgan Stanley and Charles Schwab are, respectively, about ten times and seven times the size of Raymond James. RJF makes up for this disparity by utilizing a distinctly different business model. An example would be the fact that Raymond James is the only broker left still charging a commission for stock trades.
RJF ranks last in fees but very high in customer satisfaction among its peers. In other words, Raymond James is the financial services firm to use if you need a lot of hand-holding and you don't mind paying for it. There is clearly a need for this type of service and Raymond James has made it their niche.
I'm adding RJF to the 2 for 1 Index with some reservations. Its valuation numbers, growth projections, balance sheet and other metrics are OK but do not stand out in the way I like to see in my stock picks.
I will add RJF to the Index with the faith that the "stock split advantage" will give this position the boost that it needs to put its performance at least a little ahead of the market's return over the next few years.
