Investors have been struggling for the last year (8/31/21 through 8/31/22), with the market, measured by the S&P 500 Total Return Index, off by over 11%, asserts Neil Macneale, editor of 2-for-1 Stock Split Newsletter.
The good news is the 2 for 1 Index, over the same period, is off by less than half that percentage, at -5.33%. This difference is well above the typical 2.5% average annual outperformance the 2 for 1 Index has provided over the market for the last 26 years. I won't speculate as to exactly why this is happening but I'm not complaining.
This month, there are just two splits to consider. The first, Palo Alto Networks (PANW), is not profitable, is heavily indebted, and is selling at 86 times its book value. Forget it!
Bio-Techne Corporation (TECH), on the other hand, deserves a look. The company's board of directors announced its intention to seek approval, during its upcoming 2022 annual meeting of shareholders, for an increase in the total number of authorized shares to allow a future 4 for 1 split to take place in 2023.
This is not an actual split announcement but, for our purposes, it offers up the same signal that the board is quite optimistic about the company's future prospects.
It is said that the real success stories of the 1849 California gold rush primarily involved the merchants who sold the miners their tools, not the miners themselves. TECH is a "selling shovels to the gold miners" story. Bio-Techne makes and sells the tools used in the bio-science research business.
There are lots of bio-science companies; a few very big ones and lots of very small ones. Some are, or will be, successful. Many will struggle and fail. But they all buy stuff from Bio-Techne.
TECH is a well managed company with little debt, good profits, and solid growth. The valuation numbers are not to my liking but they are the only significant negatives in the picture. Analysts will say TECH's five-year 26% average annual earnings growth justifies its PE ratio of 52 and, in this case, I have to agree and will add TECH to our index.