In today's market, nothing triggers a buying frenzy quite like a stock split. When tech giants announce a split, retail traders flood in, convinced they are getting a "deal" because the share price is suddenly lower.

But looking back at the 1983 wisdom of the Oracle of Omaha, we find a completely different approach. While other CEOs desperate for attention try to lower the barrier to entry, Buffett intentionally kept his stock price high. He essentially put up a velvet rope around his company.

Why would anyone limit their own pool of buyers? The answer is a masterclass in long-term stability.

You cannot hand-pick your shareholders. The stock market is a public place where anyone with cash can enter. However, Buffett argues that you can choose who shows up based on how you "advertise" the event.

Think of it this way:

Buffett realized that if he split the stock to make it "cheap," he would attract people who focus on the wrong things. He wanted to attract investors who focus on business results, not market prices. By consistently communicating a boring, long-term philosophy, he filtered out the adrenaline junkies.

There is a common psychological trap in investing. Some people feel wealthier having 100 shares at $10 rather than 1 share at $1,000.

This is irrational. It is like cutting a pizza into 20 slices instead of 4 and thinking you have more food.

Buffett warned that investors who prefer "paper to value" (more shares rather than better shares) are often the same people who make emotional decisions. If a CEO caters to these investors, they are filling their shareholder base with people who are likely to panic when things get tough.

Here is the critical strategy for us in the Relax to Rich Club: Manic-depressive shareholders create manic-depressive stock prices.

If your fellow shareholders are flighty, emotional, and focused on short-term gains, the stock price will swing wildly unrelated to the actual business. Buffett’s goal was to ensure that the stock price tracked the intrinsic value of the business as closely as possible.

By refusing to split the stock, he discouraged the "get rich quick" crowd. This protected the long-term holders. It meant that when a loyal shareholder eventually decided to sell, they could do so in a market populated by rational buyers, not panic-sellers.

The Bottom Line
You want to be in a "club" with partners who are as calm and rational as you are. When analyzing a company, look at who else owns it. Are they there for the rock concert, or are they settling in for the opera?

I’d love to hear from you. 👇
Do you prefer owning stocks that are "popular" and buzzy, or do you prefer the quiet, boring compounders? Reply and let me know!

To your freedom,