These are the best times for small stockholders of power distributor Manila Electric Co. (Meralco), beer maker San Miguel Brewery Inc. and other blue-chip companies that are in the crosshairs of investors awash with cash but have nowhere to go.

With investment prospects and credit markets in the US and other developed countries in a flux, local and foreign funds managers have taken interest in the country’s top corporations.

Skeptics and pessimists aside, the money handlers see something in the horizon that give them confidence that the business environment will be favorable and that their investments will bring in the desired returns.

Metro Pacific Investments Corp. has declared its intention to buy more Meralco shares, in addition to what it already owns, to solidify its hold on the erstwhile crown jewel of the Lopez family.

Kirin Brewery Co., one of Japan’s largest beverage companies, has offered to buy the rest of the stocks of San Miguel Brewery, the flagship of food conglomerate San Miguel Corp., still in the hands of other stockholders.

As the traditional month for the conduct of annual stockholders’ meeting nears, expect the major stockholders of other big league corporations, who are uneasy about their control of the boardroom, to buy more shares from the stock market or existing stockholders.

Dilemma

The small shareholders (or those who own shares of stock that do not qualify them for a seat in the board of directors) in these corporations face a “pleasant” problem.

If the offer price is good, meaning, it represents a fair amount of profit from the stocks’ acquisition cost, the stockholder may be tempted to accept the offer.

The urge to sell becomes stronger if the price goes up to historic highs or the prospective buyers practically go knocking at the doors of stockholders to buy their shares.

When Meralco shares traded at P112 last month at the height of the buying spree by Philippine Long Distance Telephone Co., several of my friends who owned some shares were caught in a Hamlet-like situation: To sell or not to sell.

For those who acquired their shares at half, or even less, that price, unloading the stocks was an inviting proposition.

They had a feeling that price may not come again, especially now when the adverse effects of the global financial crisis are being felt by the local bourse.

And true enough, a couple of days later the price of Meralco shares went down and settled in the P80s range.

Wait and see

Reports of high offer prices for stocks often engender a wait-and-see attitude among the affected shareholders.

The questions that usually come into play are: What are the chances of the price going up further? Or going down when the buying party has met its stock purchase target? Should I just sit tight and await any developments that may affect the price movement?

For most stockholders, the usual reaction is to hang on to the shares in the fervent hope (accompanied by prayers) that the price will continue to go north.

But just how high the price should go up before they decide to sell is a big question mark. Why should I sell now when the trading price may still rise or the buyer may offer a higher price?

The savvy stockholder knows that price movements in the stock market are as unpredictable as earthquakes, and that potential buyers can always change their buying strategies.

By gut feel, he knows when to temper his “greed” and be content with whatever profit he may earn by selling his stocks when they hit a certain price range, even if there are strong indications that the price may go higher.

The stockholder who thinks the price has no other way to go but up may find himself the morning after with less valuable stocks, or hearing the news that the buyer is no longer interested in acquiring more shares.

Evaluation

Whether or not a stockholder should take his money and run when stock prices shoot up on the stock market or third parties announce their intention to buy available shares depends on the stockholder’s financial position.

If he has pressing financial needs and there are no other funding sources available, or if there are, the cost of their availment is high, it makes sense to take advantage of the appreciation of the value of his stocks.

In so doing, however, he should be reasonable about his profit objectives and resist the urge to count the chicken before the eggs are hatched.

If it’s an offer to buy, he should read the terms and conditions of the tender offer closely to make sure he meets its criteria within the stated time frames.

Tender offers allow the prospective buyers to reject offered stocks if the action is made outside of the deadline or the targeted number of shares has been reached.

Now, if the shareholder is not in the red or has no immediate need for money, it would be advisable for him to hold on to his stocks and enjoy the pleasure of seeing their value go up, at least on paper.

When a shareholder buys stocks for investment purposes, and not to gain from occasional price adjustments, he should avoid being distracted by temporary hikes in their prices brought about by internal corporate moves.

Statistics show that, by and large, the value of the stocks of the country’s top companies appreciates over the long haul.

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For feedback, please write to rpalabrica@inquirer.com.ph.