3 of the Best Stock-Split Stocks to Buy Now and Hold Forever

3 of the Best Stock-Split Stocks to Buy Now and Hold Forever

These giants of the technology industry are proven value creators.

A company that conducts a stock split typically does so to reduce its high share price so it’s more attractive to smaller investors. Therefore, what do most stock-splitters have in common? They’ve created so much value over the long term that their share prices have soared into the hundreds or even thousands of dollars.

2022 has been a big year for stock splits. Some of the largest technology giants in the U.S. have chosen to execute them, and it prompts an interesting question: Could they perform just as well in the future, so another stock split is eventually needed? That would point to major gains for investors over the long run. A panel of Motley Fool contributors have identified Google parent Alphabet ( GOOGL -1.72%) ( GOOG -1.69%), Shopify ( SHOP -3.71%), and Tesla ( TSLA -2.51%) as the three best candidates.

Here’s why investors will want to buy and hold them forever. Leading from the front

Anthony Di Pizio (Alphabet): Historically, technology companies have struggled to maintain their relevance; the industry moves quickly and fresh competition is always around the corner (remember Myspace?). But the tech giants of today are relentless innovators; they rapidly adapt to change and spend aggressively on refining their edge to stay one step ahead of disruptors.

Alphabet’s YouTube platform is a prime example of this, and it’s a reason investors should want to own Alphabet stock for the extreme long term. The social media industry is being dominated by ByteDance’s TikTok short-form video platform right now, which has become the fastest-growing mobile app in history. YouTube moved quickly to adapt to this threat by introducing its “Shorts” concept. Two years later, Shorts is attracting 1.5 billion monthly users, placing it neck and neck with its new rival.

But Alphabet has a history of similar successes. After all, its Google Search engine has 91% market share globally and that doesn’t happen without a commitment to endless improvement. The brand is basically competing with itself in the search industry. Similarly, Google Cloud is currently outgrowing its peers — one number doesn’t make a trend, but in the quarter ended June 30 it grew its revenue by 35%, which was faster than its two main competitors, Amazon Web Services (33%) and Microsoft Azure (20%). Google Cloud is much smaller than both of them based on sales, but beating them for growth is key to catching up in the long run.

Financially speaking, Alphabet is a powerhouse and that’s thanks to its operational diversity highlighted above. The company has generated $278 billion in revenue over the last four quarters, and it’s highly profitable with $5.37 in earnings per share over the same period. It means Alphabet stock is about 24% cheaper than the broader tech market right now based on its price-to-earnings ratio of 20.3, compared to 26.7 for the Nasdaq-100 index. It might be a great time to pounce with the intention of holding for the long term, especially for smaller investors, because Alphabet’s recent 20-for-1 stock split has made it far more affordable. Don’t forget about this e-commerce darling

Jamie Louko (Shopify): Shopify enacted a 10-for-1 stock split in late June, but the company didn’t see the short-term pop in its share price the way most companies that recently split their stock have. While a stock split doesn’t fundamentally change the business — it only makes shares cheaper by turning one share into 10 — investors have gotten excited about stock splits this year. Shopify seemed to be left out of that, but here’s why this stock shouldn’t be forgotten.

Part of the reason shares didn’t see that boost after Shopify split its stock is that shares have been on the decline in recent months. Year to date, Shopify stock is down more than 77% as it has struggled with a looming recession and rising inflation . These challenging macroeconomic factors are impacting Shopify, as consumers are less willing to buy discretionary e-commerce items during times of uncertainty. The company enables millions of e-commerce businesses to sell online, so less activity for its merchants results in less revenue for Shopify.

That said, Shopify certainly has the potential to win over the long term. Its solutions have seen steady adoption. Even during this difficult environment, Shopify saw e-commerce and point-of-sale gross merchandise volume growth that outpaced the broader industry in the U.S. in the second quarter of 2022, signaling that it is taking market share.

Shopify also has one key advantage: its switching costs. […]

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