From this study the publishers found what they were looking for; an opportunity of time to invest in stock splits that publishers call “the investment period” or “the sweet spot.” A strategy was developed based on their analysis. The strategy is all based around buying a stock that splits, one to two weeks before it splits and selling it one to 10 days after the stock makes the splits. The exact days to buy and sell are based a certain category a stock falls in. Once a stock is placed in its category,  it is then compared to historical data, and that data gives us the best days to buy and sell.

This strategy has been active since 1997 and has posted an average annual gain of 104% and a 182% gain in 1999. In 2000, even with the DOW and the Nasdaq down, the strategy posted a 60.89% gain. The study, which is an ongoing project, takes many factors into consideration to develop various criteria. From this analysis, proprietary software has been developed to determine which stocks will become picks for this strategy. Not all stocks meet the criteria needed to become Strategy picks.

The process starts out through diligent observation of all companies that announce a stock split. Immediately upon a company announcing a split, all pertinent information about the split (announce data, pay date, ex-date, split ratio, price history, etc.) is entered into the proprietary software program. The system then determines which stocks meet the criteria, the best day to buy a particular pick and the best day to sell. The information is then posted to the SpliltMaster web site two days in advance of a buy date. The site also posts all stocks that are active in the system. Active Picks are those stocks that have reached the posted buy date but have not yet reached their posted sell date.

This site is updated on a daily basis. Subscribers can login to the SplitMaster.com site at any time to see what the latest postings are. THERE ARE NO LENGTHY REPORTS TO DOWNLOAD FROM YOUR E-MAIL, NO LENGTHY STRATEGIES TO STUDY AND NO CHARTS TO ANALYZE. You can do further studies if you wish, through Yahoo Finance or other free financial sites, but continuing research shows, so far, that the system can not be improved.

The key to this system is to invest in all the posted picks and invest in an even number of shares. For example, if your investment dollars allow, you might decide to buy 100 shares of each pick. The reason for the equal number of shares is due to the fact that no one can predict which stocks will substantially increase in value during the investment period and which stocks will only increase slightly or decrease in value. So if you invest on emotion, you might buy 10 shares of stock A and 100 shares of stock B. In this scenario, if stock A increases substantially but stock B decreases even a little, you are going to lose. 

Here’s an example. Stock A is priced at $100 and you invest in 10 shares for a total of $1,000. Stock B is only $40 so you invest in 100 shares for a total of $4,000. Now stock A goes up a healthy $10 for a profit of $100. Stock B goes down only $2 for a loss of $200. You are $100 in the hole. However, if you had invested in 10 shares of each stock, you would have made a $100 profit on Stocks A and only a $20 loss on stock B for a total gain of $80. Likewise, it is best to invest in all the picks rather than picking only certain ones. This is called “cherry picking,” and in the Basic Strategy cherry picking usually does not work. No one knows which stock will go up and which will go down during the investment period. Trying to guess which posted picks will work best is just that - a guess. But investing in all the picks is investing in a proven strategy with a proven track record. Hopefully now you see why the strategy is based on all the picks and equal shares. However, the final decision is up to the individual trader and they should always do what makes them comfortable.

The good news is, a trader can choose the number of shares that best fits his/her investment dollars. Whether a trader purchases 10 shares of all the picks or 1,000 shares, the percentage of gain is the same. Of course this does not take into account commission. Obviously a low commission structure is to your advantage. In today’s market environment, there are many low commission online brokerage firms to take advantage of. In fact, there are now some brokerage firms that offer free trades if you have a minimum balance in an account.

For more leverage and even bigger gains, you can invest in option contracts for a fraction of the cost of the stock. Options come in contracts of 100 shares each. A stock that is priced at $100 for example, could have options priced at $10 each. So a contract of 100 shares equals $1,000. This means that for $1,000 you control 100 shares of a stock that otherwise would have cost you $10,000. A $2 up move in the stock might get you a $1 move in the option. Think about this. This means that while you would get a 2% move in the stock, if you invested in options, you would get a 10% gain.

Options are a wonderful leveraging tool but they do have risks. If you are not well acquainted with options, but like the idea, read our informational page on Stock Options or go to the Chicago Board of Options Exchange and study their site. There are also many books at your bookstore or library on stock options. We recommend “The Wall Street Money Machine” by Wade Cook. It is a fun, easy to read book and its information is invaluable.