View the article online at http://citywire.co.uk/money/article/a599257
Diary of a Dumb Investor: everyone says buy BP. I say run
Or at least I did. But I've been grabbed by received wisdom and dealt a stultifying blow.
Maybe I’m a bit simple. Dumb even. But I just don’t get it. What slippery logic inspired my brother – the former incarnation of the Dumb Investor, now working in the City (geographically at least) – to buy shares in oil-pusher BP? What gulf of knowledge encouraged his foray into this great lumbering calamity of a company?
Well, you know those spiky financial charts? Take a look at the one that shows the price of oil. Dumb Investor number one thought he could ride the rising oil price higher. So he bought in at the end of February – this neatly coincides with the summit of the oil price chart, just before it drops steeply. What a clod.
A 20% share price fall later, what do I do?
With the oil price still falling while the global economy swoons, do I add BP (BP.L) to my growing pile of has-beens? I ditched Lloyds (LLOY.L) and I have just sold out of my US shares ETF for reasons I explained last week. I’m trying to get some cash together so I can buy some winners in the Big Rally, you see.
Where I stood on Monday: Click to enlarge
So I turned to Google again (regular readers may spot a trend here) and I have basically surmised that I need to wait before I sell BP.
The company is trying to offload its part of a Russian joint venture, TNK-BP. And investors, with their revulsion of ‘uncertainty’, are waiting for ‘clarity’ on this front. Then there is the oil spill business, with BP trying to reach a settlement with the US government.
(Incidentally and remarkably considering the American ruckus after oil spill, I learnt from a Bloomberg article that BP is upping the ante in the Gulf of Mexico: ‘BP Plc was the high bidder on 43 leases to drill in the central Gulf of Mexico where two years ago its Macondo well exploded, causing the largest US offshore oil spill,’ the article said. Short memories!)
Also, some of my fellow shareholders think BP could benefit from a bit of a change of business model. Though there is nothing to say this will amount to anything.
Finally, the City spivs say hold on. In fact apparently not one analyst says BP shares are a ‘sell’. Instead more than 30 of them say ‘buy’, ‘outperform’ (¿que?) or 'hold', each in just about equal measure. One says ‘underperform’.
I’m a little bit sceptical of these guys, but still 30-odd – presumably – experienced company analysts versus little me, a toddler of the investment world, still on stabilisers? I don’t feel comfortable with that.
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