Name three things these five companies have in common: AutoZone,

Booking Holdings,

Cable One,




One: Their shares are among the priciest in the U.S. stock market — all in four figures. Two: They have almost never split their stock. Three: All enjoy among the highest-quality shareholders measured by long-term horizon and portfolio concentration.

These are not coincidences, yet the shared experience seems lost on the increasing number of companies doing stock splits, from


(ticker: AAPL) to


(TSLA). Both of these companies recently split their stock in order to cut share price. They apparently are trying to attract shareholders who will also be customers. But while that might be good product marketing, it is definitely bad investor stewardship: Stock splits degrade a company’s shareholder quality.

Managers and investors alike should care about which shareholders grace a company’s shareholder list. At companies brimming with transient shareholders, managers bend toward a short-term focus, while those dominated by indexers get shareholder proposals and votes aligning with prevailing social and political fashions.

Some companies attract a greater proportion than others of patient and focused shareholders — what Warren Buffett has dubbed “high-quality shareholders” (QSs for short). While all public companies have transients and indexers among their shareholders, those with a higher density of QSs get longer strategic runways that are associated with superior performance.

Companies shape their shareholder base through dozens of corporate practices. Actions that focus on stock price tend to draw transients while those emphasizing business performance attract QSs. Stock splits are riveted on stock price; managers who cultivate quality shareholders shun them.

After all, stock splits are like exchanging a dime for two nickels. They produce no economic effect, but carry subtle psychological ones. Side-effects include increasing a company’s market capitalization, despite no change in