Dips in stock prices often appear to be good entry points for investors who are considering buying a stock.
But when the stock's price is well into four figures, it can be hard for smaller investors to pull the trigger.
A few weeks ago, Real Money Columnist Stephen "Sarge" Guilfoyle took a look at Amazon following a sharp drop to $2,749.06, its lowest close since June 2020.
Guilfoyle considered the company's fundamentals, which he said were pretty good, and its technical chart picture, not so hot.
But he also expressed frustration with the company's new CEO for another reason.
I can not figure out why CEO Andy Jassy has shown to this point no interest in splitting the stock after what such action has done for the likes of Apple (AAPL) - and Tesla (TSLA) - shareholders," . "The action could also attract middle class retail investors who want to purchase at least one full share of stock when they invest."
Low and behold, the very next day, Amazon announced it plans to split its stock 20-for-1 for shareholders holding the stock as of June 3. .
To be sure, splitting a stock doesn't add any value in and of itself. But it can, as Guilfoyle argued, make it more appealing to mom and pop investors.
Splits can also make a stock eligible for inclusion in big indexes. Apple, the world's most valuable company, was only added to the Dow Jones Industrial Average after it famously split its stock 7 for 1 in 2014. It joined the index the next year, replacing AT&T (T) - .
And judging by the reaction to Amazon, which went on a tear after the announcement, splits can help drive animal spirits on Wall Street. Perhaps that's why Tesla announced late in March that shareholders will vote on a plan to split its stock for the second time in two years at the company's annual meeting later this spring.