The Netflix logo is shown in this illustration photograph in Encinitas, Calif., in this Oct.14, 2014, file photo.Mike Blake/Reuters
Netflix Inc. notwithstanding, the $100 Stock Club is getting less exclusive.
Almost a quarter of companies in the Standard & Poor's 500 Index have surpassed triple-digits, four times the number in 2010, data compiled by Bloomberg and S&P show. Hundred-dollar stocks have multiplied as equities surged and companies all but did away with splits. Eight have taken the action in 2015, including Netflix on Tuesday, compared with 102 in 1997.
Stock splits are increasingly rare in an American stock market that is dominated by institutional investors and exchange-traded funds, which don't care about the absolute price of a share. Companies from Biogen Inc. to Amazon.com Inc. let their shares trade above $400. Netflix gained 2.2 per cent to a record $696.10 at 10 a.m. in New York.
"A lot of it is that companies do not feel the necessity to keep it in a trading range that is affordable," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, in a phone interview. "People are not scared of a $100 stock. People aren't afraid of a $1,000 stock."
Splits reached their apex in the 1990s when companies sought to broaden their appeal to individuals lured by the biggest bull market since the 1920s. They're less inclined to divide up their shares now.
"The way people trade and the way they can access the markets, it's totally changed," Mr. Silverblatt said. "People have a lot more money to invest. Not necessarily because of their wealth, but because what they can get" in retirement plans and through brokerage accounts, he said.
Three Causes
The proliferation of hundred-dollar stocks has at least three causes: the dearth of splits, the slope of the rally since March 2009, and the rally's breadth.
Seldom has a bull market benefited as many companies as this one, as evidenced by the outperformance of a version of the S&P 500 that strips out market-value weightings. It's up 306 per cent since March 2009 compared with the regular index, which is up 214 percent.
The popularity of indexing and share buybacks in conjunction with a psychological pull toward the hundred-dollar mark propelled the $100 club expansion, said Jeff Sica, who oversees $1.5-billion as president and chief executive officer of Circle Squared Alternative Investments in Morristown, N.J.
"I look at it as a sign of a market top with this many stocks at a hundred," Sica said by phone from Santa Barbara, Calif. "There are just too many cross-currents in the market to justify these valuations."
Apple Split
Splits haven't entirely disappeared. Starbucks Corp. and Visa Inc. are among companies that split this year. Google Inc. and Apple Inc. did so in 2014, allowing Apple to join the Dow Jones Industrial Average.
Shying away from stock splits, companies are instead rewarding shareholders with historic buybacks and dividends. More than $2-trillion of stock repurchases since 2009 have fueled one of the strongest rallies of the past 50 years.
Some analysts disagree that a greater number of expensive stocks means much of anything.
"That's kind of a cool statistic that probably has no predictive value," said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, which oversees $27-billion. "You've had more than 200 per cent appreciation so the average $55 stock is now going to be over a hundred unless the company decides to split."