Buying BP stock?

[HardDrive]

Theres got to be a buying opportunity here at some point. They can fine them till the cows come home, but as long as we keep driving, and the oil keeps flowing, eventually they will get out from under it. At what point can you get a handle on the costs of the spill and come up with a price?

Speak to me internet oracles....

[pwd72s]

What if the fines get so excessive that BP becomes nationalized...like GM?

[mikester]

It's gambling - pure and simple. Of course much of the market is a gamble these days but how do you know the difference between 'timing' the market vs 'investing smartly'?

I would say that I would be willing to buy a few shares with 'play' money. Money I can afford to lose. I've thought about it a bit myself but every time I've seen a company hitting the skids hard and I have thought about buying - they never recover.

=-)

[Porsche-O-Phile]

I've been weighing this too - it's a logical play when you think about it.

I do think however the the overall market is due for a fairly large correction soon which may or may not affect BP. If BP has already been beaten down and a correction comes, the big boys on the street may view the decline as being "priced in already" for purposes of BP stock, so I'd expect that BP would fall less percentage-wise than most of the rest in such a correction.

One of the advantages of being Public Enemy #1 I guess... At least that's how I see it.

I do hold some BP currently (one of the few holdings I have left after the last 2-3 years) which has had a rough ride as of late. I don't really care, my position isn't that big and I'm in for the long haul, but like you I am definitely considering expanding my position quite a bit believing they're going to get beaten down severely in the markets as a result of this spill.

Yes, their losses are (and will be) real, but they'll recover.

[widgeon13]

"Long term we still believe BP is undervalued and that the market is now discounting the worst case rather than most likely outcome. We would buy the stock, realizing that near term BP will continue to be buffeted by negative speculation, at least until it can be more informative about costs," said analysts at Citigroup.

I personally wouldn't touch it!

And then there was this:

http://www.marketwatch.com/story/bps-market-value-halves-as-spill-costs-loom-large-2010-06-09?dist=afterbell

[schamp]

I sold bp when all of this started. When the blow out preventer failed I figured it was going to take awhile. I am expecting it to fall to somewhere in the teens. If they don't pay a dividend even lower.

[masraum]

BP and Transocean seem like possibilities. I think they would both be long term though. You might not see what you wanted for years, but then isn't that what stocks are really for, long term.

[red-beard]

From the WSJ, a couple of days ago...

Betting on the Bad Guys
Cartoonist Scott Adams's personal road to riches: Put your money on the companies that you hate the most

By SCOTT ADAMS
When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. Although I should have waited a week.

People ask me how it feels to take the side of moral bankruptcy. Answer: Pretty good! Thanks for asking. How's it feel to be a disgruntled victim?

I have a theory that you should invest in the companies that you hate the most. The usual reason for hating a company is that the company is so powerful it can make you balance your wallet on your nose while you beg for their product. Oil companies such as BP don't actually make you beg for oil, but I think we all realize that they could. It's implied in the price of gas.

I hate BP, but I admire them too, in the same way I respect the work ethic of serial killers. I remember the day I learned that BP was using a submarine…with a web cam…a mile under the sea…to feed live video of their disaster to the world. My mind screamed "STOP TRYING TO MAKE ME LOVE YOU! MUST…THINK…OF DEAD BIRDS TO MAINTAIN ANGER!" The geeky side of me has a bit of a crush on them, but I still hate them for turning Florida into a dip stick.

Apparently BP has its own navy, a small air force, and enough money to build floating cities on the sea, most of which are still upright. If there's oil on the moon, BP will be the first to send a hose into space and suck on the moon until it's the size of a grapefruit. As an investor, that's the side I want to be on, with BP, not the loser moon.

I'd like to see a movie in which James Bond tries to defeat BP, but in the end they run Bond through a machine that turns him into "junk shot" debris to seal a leaky well. I'm just saying you don't always have to root for Bond. Be flexible.

Perhaps you think it's absurd to invest in companies just because you hate them. But let's compare my method to all of the other ways you could decide where to invest.

Technical Analysis
Technical analysis involves studying graphs of stock movement over time as a way to predict future moves. It's a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.

Investing in Well-Managed Companies
When companies make money, we assume they are well-managed. That perception is reinforced by the CEOs of those companies who are happy to tell you all the clever things they did to make it happen. The problem with relying on this source of information is that CEOs are highly skilled in a special form of lying called leadership. Leadership involves convincing employees and investors that the CEO has something called a vision, a type of optimistic hallucination that can come true only in an environment in which the CEO is massively overcompensated and the employees have learned to be less selfish.

Track Record
Perhaps you can safely invest in companies that have a long track record of being profitable. That sounds safe and reasonable, right? The problem is that every investment expert knows two truths about investing: 1) Past performance is no indication of future performance. 2) You need to consider a company's track record.

Right, yes, those are opposites. And it's pretty much all that anyone knows about investing. An investment professional can argue for any sort of investment decision by selectively ignoring either point 1 or 2. And for that you will pay the investment professional 1% to 2% of your portfolio value annually, no matter the performance.

Invest in Companies You Love
Instead of investing in companies you hate, as I have suggested, perhaps you could invest in companies you love. I once hired professional money managers at Wells Fargo to do essentially that for me. As part of their service they promised to listen to the dopey-happy hallucinations of professional liars (CEOs) and be gullible on my behalf. The pros at Wells Fargo bought for my portfolio Enron, WorldCom, and a number of other much-loved companies that soon went out of business. For that, I hate Wells Fargo. But I sure wish I had bought stock in Wells Fargo at the time I hated them the most, because Wells Fargo itself performed great. See how this works?

Do Your Own Research
I didn't let Wells Fargo manage my entire portfolio, thanks to my native distrust of all humanity. For the other half of my portfolio I did my own research. (Imagine a field of red flags, all wildly waving. I didn't notice them.) My favorite investment was in a company I absolutely loved. I loved their business model. I loved their mission. I loved how they planned to make our daily lives easier. They were simply adorable as they struggled to change an entrenched industry. Their leaders reported that the company had finally turned cash positive in one key area, thus validating their business model, and proving that the future was rosy. I doubled down. The company was Webvan, may it rest in peace.

(This would be a good time to remind you not to make investment decisions based on the wisdom of cartoonists.)

But What About Warren Buffett?
The argument goes that if Warren Buffett can buy quality companies at reasonable prices, hold them for the long term and become a billionaire, then so can you. Do you know who would be the first person to tell you that you aren't smart enough or well-informed enough to pull that off? His name is Warren Buffett. OK, he's probably too nice to say that, but I'm pretty sure he's thinking it. However, he might tell you that he makes his money by knowing things that other people don't know, and buying things that other people can't buy, such as entire companies.

People Love Berkshire Hathaway And That Has Done Great
I'm not saying that the companies you love are automatically bad investments. I'm saying that investing in companies you love is riskier than investing in companies you hate.

Second, take a look at Berkshire Hathaway's holdings. It's a rogue's gallery of junk food purveyors, banks, insurance companies and yes, Goldman Sachs and Moody's. The second largest holding of Berkshire Hathaway is…wait for it…Wells Fargo.

(Disclosure: I own stock in Berkshire Hathaway for the very reasons I'm describing. And my first job out of college was at Crocker National Bank, later swallowed by Wells Fargo.)

Let's talk about morality. Can you justify owning stock in companies that are treating the Earth like a prison pillow with a crayon face? Of course you can, but it takes some mental gymnastics. I'm here to help.

If you buy stock in a despicable company, it means some of the previous owners of that company sold it to you. If the stock then rises more than the market average, you successfully screwed the previous owners of the hated company. That's exactly like justice, only better because you made a profit. Then you can sell your stocks for a gain and donate all of your earnings to good causes, such as education for your own kids.

Having absorbed all of the wisdom I have presented here so far, you are naturally wondering if I have any additional investment tips. Yes, and I will put my tips in the form of a true story. Recently I bought something called an iPhone. It drops calls so often that I no longer use it for audio conversations. It's too frustrating. And unlike my old BlackBerry days, I don't send e-mail on the iPhone because the on-screen keyboard is, as far as I can tell, an elaborate practical joke. I am, however, willing to respond to incoming text messages a long as they are in the form of yes-no questions and my answer are in the affirmative. In those cases I can simply type "k," the shorthand for OK, and I have trained my friends and family to accept L, J, O, or comma as meaning the same thing.

The other day I was in the Apple Store, asking how to repair a defective Apple laptop, and decided, irrationally, that I needed to have Apple's new iPad. The smiling Apple employee said she would be willing to put me on a list so I could wait an indefinite amount of time to maybe someday have one. I instinctively put my wallet on my nose and started barking like a seal, thinking it might reduce the wait time, but they're so used to seeing that maneuver that it didn't help.

My point is that I hate Apple. I hate that I irrationally crave their products, I hate their emotional control over my entire family, I hate the time I waste trying to make iTunes work, I hate how they manipulate my desires, I hate their closed systems, I hate Steve Jobs's black turtlenecks, and I hate that they call their store employees Geniuses which, as far as I can tell, is actually true. My point is that I wish I had bought stock in Apple five years ago when I first started hating them. But I hate them more every day, which is a positive sign for investing, so I'll probably buy some shares.

Again, I remind you to ignore me.

—Scott Adams is the creator of "Dilbert."

[widgeon13]

I hate Dilbert!

[HardDrive]

Originally Posted by pwd72s

What if the fines get so excessive that BP becomes nationalized...like GM?

That did cross my mind. Bankruptcy doesn't seem unreasonable as well.

[JJ 911SC]

Originally Posted by HardDrive

Theres got to be a buying opportunity here at some point...

Only if you Buy Low, Sell High...

Plenty of people in my office (in their 60's) did the reverse and that is why they are still here...

[jyl]

Highest estimate I've seen of cleanup costs and damages is $37 billion. Credit Suisse. Need to look at projected cash flow next 5 years, assume they are barred from new drilling in Gulf for some years (impacts proven reserves as well as cash flow), assume any debt rollover is done at big premium (300-400bp). Probably can assume dividend gets cut at least temporarily. Using oil at $60/bbl. Does it pencil out?

[mikester]

I think BP made $8 BILLION last QUARTER.

[Two Rivers]

I`m waiting for BP to shut down all there US oil drilling and sit on there billions,can all there employees and tell the press to shove off. The US has been very lucky with gas and oil prices over the years, just look at gas and oil prices in other country's I'm sure would buy oil at the prices or even more then BP sells to the US. Its kinda like buying a MG or Triumph.They look kinda good but the reliability sucks. I not be buying BP at this time.

[HardDrive]

They currently have 18 billion barrels of proved reserves and 63 billion barrels of resources.

Source: BP hit by doubts over ability to pay spill costs - MarketWatch

@$76 a barrel x 18 billion = $1.368 Trillion. (Yeah, I know its not that simple.)

Highest clean up cost I have seen is $40 billion.

I'm getting in. I wager the UK pension funds will force the stock price up again.

[enzo1]

the bbls/day have been upped to 40,000

[Porsche-O-Phile]

BP isn't going anywhere. They'll take a beating for a while but will weather this storm. Unlike the big financial companies which recently collapsed (or should have), BP actually produces real, tangible products of real value and does it on a huge scale. Not to mention that continued viability of the company is very much in the British government's national interest. They will get involved shortly if they haven't already.

They are also diversified into exploration of alternative energies and have a global presence. They're not going away anytime soon.

The notion that they should foot the bill for Obama's moratorium is silly - the lawyers are going to have a field day with that one. Obama has royally screwed the pooch here. Instead of trying to work with the company and actually DO SOMETHING, he's been sitting back thumbing his nose at them, making enemies, blathering about how angry he is and ultimatley, DOING NOTHING. Way to make allies and get things accomplished there bub. BP will cooperate with you so much when you start levying criminal charges.

Anyway, long story short is I believe BP is and will remain solvent although their competitors will obviously see this as an opportunity to seize market share away from them.

[JJ 911SC]

Originally Posted by Porsche-O-Phile

BP isn't going anywhere. They'll take a beating for a while but will weather this storm. Unlike the big financial companies which recently collapsed (or should have), BP actually produces real, tangible products of real value and does it on a huge scale. Not to mention that continued viability of the company is very much in the British government's national interest...

On the news this morning they were mentioning that with the rhetoric at the heads of government level is heading toward diplomatic "incident" level.

The lost for the share holders and the pension plans are in the tens of billions (I know, nothing to compare to what the cost in the Gulf will end-up to).

One way out would be to break up BP and sell to Shell (and the likes) and thanks to some financial laws... their responsibility would be cap (I guess a lot of lawyers would be P.O. if that happened).

Hopefully it will not happened and they will pay for the cleanup and the lost of revenue for those who's life have been affected.

Back in the 90's, I remember walking on the beach at Corpus Christi and my sole were black by the time I got back to the car.

Sooner or later we have to Pay the Piper... and I don't think it's going to get better.

Back home we are just about to give go ahead with drilling in the Arctic.

But in the name of the economy, the show must go on; Louisiana leaders want Gulf oil drilling to resume | Sympatico.ca News

P.S. If it read funny... English is not my "mother tongue"...

[BigD9146gt]

On a tour of Hearst Castle, the guild quoted Mr Hearst, "the stock market is a way for the rich to make money off the poor".

Citibank is in the business to do one thing. I can tell you what they're not in business for, friendship.

[jyl]

Media reports BP preparing to suspend dividend.