Syndicate
Buying Odd Lot Shares
In cases in which you have a small investor that is interested in buying only a few hundred shares of stock, there is an easy rule to follow. If the stock looks like the right one and the price seems to be at a reasonable attractive level, purchase at the market. The extra that is left over say an eight or a quarter that an investor might have to pay is very small in comparison to the profit that one can lose if the stock is not obtained. If you think about it, most investors will simply not decide to buy a stock in the first place if they do not think that it has long range potential.
In the case of the larger investor who may perhaps be interested in obtaining thousands of shares obviously this last factor is not as easy to deal with. For all except for a very small minority of stocks, the supply that is available is usually limited enough that a try to buy at the market even half of the wanted amount may very well bring about sizable advance in quotations. The price rise all of a sudden may therefore bring about two ongoing effects, both of which have a tendency to make accumulating a block of this stock even more of a hassle. Sudden growth might be sufficient to stimulate interest and competition of other buyers. This could also cause some of the people that have been attempting to sell to hold their shares off the market in hopes that the rise will keep on going. What should a large buyer do in this type of situation?
The best thing to do in this type of situation is go to a broker or securities dealer. Doing this will allow the buyer to disclose exactly how much stock he is intending on buying. He should also tell the broker to pick up as much stock as possible but give authorization to pass up the smaller offerings if buying them would bring about a lot of competitive bids. The most important thing here though is that the buyer should provide his broker with a completely free hand on price up to a point that is a little bit above the most recent sale. How much more above will need to be thought and decided about with the broker or dealer after considering certain issues such as the size of the block that is wanted, the regular activity of the shares, how enthusiastic the investor might be for the holding as well as any other special issues that might come up.
It is possible the investor might feel he does not have a broker or dealer that he is able to trust in as having enough judgment or discretion to take care of something like this. If such is the case, the investor will need to continue without delay to finding a new broker or dealer where he is able to place his confidence in. After all; doing this kind of thing is the main function of a broker or the trading department of a securities dealer.