Split Search Leads to AstraZenaca

12/07/2015 9:00 am EST

Focus: STOCKS

Neil Macneale III

Editor, 2 for 1 Stock Split

Neil Macneale, editor of 2-for-1 Stock Split Newsletter, focuses exclusively on stocks that have announced upcoming splits. However, he discusses the challenge of picking stocks in an environment where few companies are splitting their shares.

Last month I speculated that board meetings and earnings announcements would be accompanied by an increase in split announcements. I was wrong.

In fact, there were just three in October and none so far in November. October’s splits, Bofi Holding (BOFI), Shenandoah Telcommunications (SHEN), and Global Payments (GPN).

My selection formula produces a score for each stock and the company with the highest score is almost always the one added to the index for that month. SHEN or GPN were not selected simply because their scores were lower relative to the others on the list.

BOFI had the highest score of all. Also known as the Bank of the Internet, this is an intriguing company and one I normally would have selected based on its ranking score.

However, the press on this company has been negative over the last year. Even if all the issues swirling around BOFI are resolved or proved false, it will take a while for concerns to dissipate.

Therefore, to select a buy recommendation, I had to turn to stock split ideas from previous months.

AstraZeneca (AZN) was the #2 ranked stock after it announced its split in June. It’s still #2 in our rankings and had an even higher absolute score this time around for several reasons.

First, of course, the price is lower now than five months ago, and, perhaps more importantly, the volatility and buzz about AZN have died down.

The firm was the subject of a failed buyout offer from Pfizer last April, at which time the stock price and trading volume went through the roof.

AstraZeneca is a large British drug company (seventh largest in the world) with a long, long list of mergers and acquisitions, including Medimmune, its biotech division based in Maryland.

Earnings have beat estimates for all three quarters so far this year and it’s been paying a very nice 4.4% dividend.

Other fundamentals are okay compared to its peers and, as noted above, its Beta—the measure of volatility—is way down now, to below that of the overall market. As such, the stock becomes our latest buy recommendation.

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