Diary of a Dumb Investor: everyone says buy BP. I say run

Nope, a mangy bedraggled tabby cat, once the storm that is about to strike has passed.

Until now we have only heard about the gains or losses. What about the income and what has been done with that? It would appear not reinvested.

You need to decide if you are an investor with a 3 year + time horizon or a speculator (anything shorter).

If you are an investor, you should look at the company fundamentals such as cash flow growth, but you can only be reasonably certain these will be reflected in the price on a 3 year+ basis.

If you are a speculator then you should look mainly at momentum and newsflow. If every analyst says buy, I would regard that in itself as a bear signal. Who is left to turn positive? If you are a speculator I would avoid too much research! Too much information is indeed stultifying.

On a drop below 400 you can try a quick in and out, but that's it.

The Macondo well didn't explode. Read the FACTS!

If you arn't in a hurry I would be surprised if there wasnt at least 50% upside in five years time + the divis.

I say dump BP and buy Shell - assuming you like oil & gas, which can be a solid long term hold (if you're thinking long, that is). IMHO BP's in a bit of mess and will take some sorting out for a while. Shell had its biggest mess a few years back with the scandal of mis-stated reserves, which led to changes at the top, a root and branch shake-up of corporate structure and governance, and a better focus on strategy. In the past, Shell has been a bit more parsimonious with dividends than BP but its divs are reliable and as it's pretty conservatively managed, it should IMHO be safer from shocks, risks, and safety disasters of the kind that BP has in recent years inflicted on itself.

The behaviour biases of the sell side analysts on companies like this are well documented

Like this means events which are conveniently described as being "exogenous" and where there is a stong link to "non financials". (What a silly phrase when you think it covers an initial 50% drop in share price!)

For a good case study on these analyst biases re BP see Hersh Shefrin: http://bit.ly/OkVOaU

But there are also buy side biases. It took 2 years for investors to act on the Chair of the Safety Committee: http://digital.utpjournals.com/i/66288/69

What am I saying? Chasing alpha is what have been trained to do (and may be you are (belatedly!) right on this one. But securing beta is something that would serve our customers better. But hey, what do they matter?!

Bloody hell Raj, who are you tring to impress with that finance babble bullshit? "Behaviour biases"..... "Chasing Alpha"........"securing beta"

You need to get out more....a lot more!!!

Blimey, what exactly do these phrases mean?

From Wikipedia:

"Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' performances. Often, the return of a benchmark is subtracted in order to consider relative performance, which yields Jensen's alpha."

"In finance, the Beta (β) of a stock or portfolio is a number describing the volatility of an asset in relation to the volatility of the benchmark that said asset is being compared to. This benchmark is generally the overall financial market and is often estimated via the use of representative indices, such as the S&P 500.

An asset has a Beta of zero if its returns change independently of changes in the market's returns. A positive beta means that the asset's returns generally follow the market's returns, in the sense that they both tend to be above their respective averages together, or both tend to be below their respective averages together. A negative beta means that the asset's returns generally move opposite the market's returns: one will tend to be above its average when the other is below its average.

It measures the part of the asset's statistical variance that cannot be removed by the diversification provided by the portfolio of many risky assets, because of the correlation of its returns with the returns of the other assets that are in the portfolio. Beta can be estimated for individual companies using regression analysis against a stock market index."

This hasn't heped much!

To Steve 123: The techno/finance babble spouted by various and sundry - particularly those who make a living in the financial sector - is used to mask what is in essence ongoing gambling with a veneer of "science" in an effort to hoodwink the gullible into believing that they know what they're doing. Where this is given the lie is in the horrendous losses incurred by these witchdoctors and charlatans who purport to manage your money scientifically. Put simply, it's all smoke, mirrors and bizarre derivatives..........its a con.

Bore off Rustie. I have no idea what you're even doing on this site if you don't 'believe' in the stock market.

Ladysaver I'm with you. I wouldn't touch a JVG with the gangsters in Russia and I never did like the TNK deal, the Rosneft deal etc. Shell were legged over in the far east but they have kept theiir Russian business pretty clean and seem to be doing some good work in Kazakhstan.

Do you live in pseuds corner as well Jack?

Rustie has 99% street cred.

Rustie is clearly a well drilled and moderately successful troll.

When BP was originally bought I said that it was a bad idea. With market uncertainty surrounding the Company's serious exposure to litigation in the USA the price of BP shares will continue to be depressed even if the Company out performs expectations. BP is not an investment ............it's a gamble and the same goes for Lloyds which sensibly has now been sold.

Holding poor performing shares for too long is a serious mistake. Lloyds has been a basket case for many years acquired mainly by dividend seekers and day traders. No sensible investor should ever hold onto a share just because the price has fallen off a proverbial cliff. If an oiler must be held then the case for acquiring Shell for example is a far better one.

BP is a strong sell in my book.

I hope Dumb Investor Mark 2 will introduce a stop/loss system as that was the greatest single mistake made by his predecessor.