Split data show Icahn smart to sell Netflix

Published Wed, Jun 24 201512:22 PM EDTUpdated Wed, Jun 24 20152:08 PM EDT

Carl Icahn is the smart money once again. Netflix shares were soaring at the start of trading Wednesday as traders cheered a decision by the company to split its stock 7 for 1. Then an hour after the open Icahn tweeted that he sold the last of his Netflix stake after riding the video streaming king to huge gains. Read More Carl Icahn sells last of Netflix shares While stock splits appear like a good thing on the surface because they theoretically should lift demand for the shares from the retail investor, experienced traders will tell you that this is not a reason to buy the stock and often a good time to take some profits like Icahn just did. Despite the fact that splits do not change a single fundamental factor about the company, data shows the initial gains following announcement of the corporate action are quickly given up. CNBC Pro took a history of stock splits for S & P 500 members from S & P Capital IQ and screened out large splits, that is, greater than the common 2-for-1 split. We wanted to focus on the ones that are the most drastic and so in theory, should boost demand for the stock the most from the retail trading crowd. A history of those large splits over the last decade are below. CNBC Pro used Kensho, a stock market quantitative tool, to crunch how the stocks performed a month after the split was completed. While there are certainly some big winners in Keurig Green Mountain in 2010 and Johnson Controls in 2007, the average return for all the stocks over the next month was just 1 percent, about even with the S & P 500. Looking out at the even-longer term, the data get cloudy because of so many more catalysts coming into play for companies beyond 30 days. So this may not be the perfect time to completely dump Netflix, but it may be a good time to take some shares off the table and buy them back cheaper a month from now. Read More Dividend stocks to buy even if interest rates rise —With reporting by Gina Francolla Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.

Carl Icahn

David Grogan | CNBC

Carl Icahn is the smart money once again.

Netflix shares were soaring at the start of trading Wednesday as traders cheered a decision by the company to split its stock 7 for 1.

Then an hour after the open Icahn tweeted that he sold the last of his Netflix stake after riding the video streaming king to huge gains.

While stock splits appear like a good thing on the surface because they theoretically should lift demand for the shares from the retail investor, experienced traders will tell you that this is not a reason to buy the stock and often a good time to take some profits like Icahn just did.

Despite the fact that splits do not change a single fundamental factor about the company, data shows the initial gains following announcement of the corporate action are quickly given up.