Preserving Value: Exploring MRF's Choice to Avoid Stock Split
Dalal Street Investment Journal|July 17, 2023
This report by Bhavya Rathod elucidates how stock price, in isolation, may not convey the true value of the company. The price of one share, among other factors, is also a function of the outstanding shares of the company. When shares' outstanding are low, and if the demand for that stock is high, the lower supply translates into a higher price for that share. When the price of a share keeps rising, it may reach a level that may become unaffordable to a lot of investors. Therefore, some companies opt for a 'stock split' so as to make the shares affordable and reach out to more retail investors
Bhavya Rathod
Preserving Value: Exploring MRF's Choice to Avoid Stock Split

MRF made waves and created history on Dalal Street by becoming the first Indian stock to reach the remarkable milestone of ₹100,000 per share on June 13, 2023. It is worth noting that MRF shares had touched their 52-week low of ₹65,900.05 on the BSE on June 17, 2022. Analysing the stock's performance over the past decade, it has outperformed the benchmark Sensex index on seven occasions. However, between 2018 and 2021, MRF underperformed the Sensex. In the current year of 2023, MRF shares have shown a positive growth of more than 13 per cent, while the benchmark Sensex has gained over 6.5 per cent. Although MRF has reached the significant ₹100,000 milestone, it is important to highlight the substantial disparity with the second-highest priced stock, namely, Honeywell Automation, which trades at around the level of ₹42,000.

This quote reflects Warren Buffett's belief that stock splits are inconsequential to the underlying value of a company.

He suggests that investors should focus on the fundamental aspects of the business rather than getting caught up in the optics of a stock split. Meanwhile, Warren Buffet's Berkshire Hathway Class A shares continues to be the most expensive stock in the world, with the share price trading close to USD 521,000 apiece (approximately ₹4.3 crore). Unless there is a Berkshire Hathaway stock split, the highest-priced stock status will remain with Warren Buffett's conglomerate. In response, Berkshire introduced cheaper class B shares in 1996, priced at a substantially more affordable price of close to USD 340 per share currently, but has consistently refused to split the company's original class A offering.

This story is from the {{IssueName}} edition of {{MagazineName}}.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

This story is from the {{IssueName}} edition of {{MagazineName}}.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

MORE STORIES FROM DALAL STREET INVESTMENT JOURNALView all
How To Invest In An Ageing Bull Market
Dalal Street Investment Journal

How To Invest In An Ageing Bull Market

Bull rallies (periods when stock prices rise) and bear declines (periods when stock prices fall) are natural parts of stock market cycles, but they don't follow a fixed timeline.

time-read
5 mins  |
July 29, 2024
Should You Entrust All Your Money To A Single AMC?
Dalal Street Investment Journal

Should You Entrust All Your Money To A Single AMC?

If you are a market participant, you have probably heard the quote 'don't put all your eggs in one basket', which suggests diversification. Investors often focus on diversifying across categories like large-cap, mid-cap and small-cap, but they may unintentionally overlook diversification across different AMCs. The question arises: is AMC-wise diversification really necessary? Rakesh Deshmukh takes a closer look at this scenario

time-read
7 mins  |
July 29, 2024
Wild Swings Engulf Global Equities
Dalal Street Investment Journal

Wild Swings Engulf Global Equities

U.S. stock markets experienced significant volatility. An early-week rally pushed the markets to new highs, but this momentum faded, primarily due to weaknesses in the tech sector. The major indices had a mixed finish with, S&P 500 and Nasdaq closed lower, while the Dow recorded a notable gain.

time-read
2 mins  |
July 29, 2024
U.S. Elections and China's Economy Hamper Commodities
Dalal Street Investment Journal

U.S. Elections and China's Economy Hamper Commodities

Commodity markets experienced selling pressure in the last fortnight, driven by uncertainties surrounding the upcoming U.S. presidential elections, concerns about the Chinese economy, and increased agricultural production in Brazil.

time-read
2 mins  |
July 29, 2024
Wealth Building For Retirement Through Mutual Funds
Dalal Street Investment Journal

Wealth Building For Retirement Through Mutual Funds

Retirement is one of the most crucial and lifechanging phases. It marks a period where maintaining your lifestyle becomes paramount even though your regular income stops.

time-read
3 mins  |
July 29, 2024
Mastering Investment with Information Ratio
Dalal Street Investment Journal

Mastering Investment with Information Ratio

Information Ratio helps in navigating the complexities of the investment landscape by assessing an active fund manager's performance. And though it has its limitations, it remains an essential part of the finance industry. The article explains what Information Ratio is and how investors can use it as another tool

time-read
6 mins  |
July 29, 2024
Plan To Be Financially Independent
Dalal Street Investment Journal

Plan To Be Financially Independent

Each of us aspires to be financially independent as it ensures having enough resources to be self-sufficient and control our finances.

time-read
2 mins  |
July 29, 2024
❝Technology is the new game-changer"
Dalal Street Investment Journal

❝Technology is the new game-changer"

With a new breed of young investors entering the financial markets, it is the use of technology that is increasingly playing a major role in how investments are done and tracked. Anand Radhakrishnan, Managing Director, Sundaram Mutual Fund, shares his opinion about how this factor is turning into a significant tool and how it will shape the strategies of his company

time-read
5 mins  |
July 29, 2024
What If Donald Trumps?
Dalal Street Investment Journal

What If Donald Trumps?

The potential election of Donald Trump as president in the U.S. carries significant implications for the Indian equity market. It could lead to changes in the global trade dynamics, in particular affecting the Indian IT sector while also raising inflation levels and leading to yet another revision in the visa programme for Indians who want to work in the US. The article takes a closer look at what may lie in store

time-read
6 mins  |
July 29, 2024
Sectoral Gains Make A Mark
Dalal Street Investment Journal

Sectoral Gains Make A Mark

Benchmark indices continued their uptrend, reaching new record highs, although the pace has slowed as the broader markets faced selling pressures

time-read
2 mins  |
July 29, 2024