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M&G Recovery star warns BP to do more for shareholders
BP will ‘become lunch’ for rivals such as Shell and ExxonMobil if its leadership continues to underwhelm, warns M&G's Tom Dobell.
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BP (BP.L) will ‘become lunch’ for rivals such as Shell (RDSa.L) and ExxonMobil if its leadership continues to underwhelm, warns Tom Dobell, manager of the M&G Recovery fund.
Citywire A-rated Dobell, who has 0.5% of his £7.9 billion fund in the oil giant, said that considering that BP was inherently profitable when oil traded at $60 a barrel, the petroleum giant should be doing much better with Brent crude trading at $111 today, even taking into account its huge difficulties following the 2010 Gulf of Mexico oil spill.
Dobell's comments follow disappointing first-quarter results from BP earlier this month. It is a sharp change in tone from the manager, who takes pride in taking long-term stakes in companies. At the end of last year he expressed his hope that the company's turnround after the Macondo oil well disaster would continue.
Speaking at a briefing with journalists today Dobell criticised BP's chairman, Carl-Henric Svanberg (pictured), who joined the company's board in 2009 before clinching its top position a year later.
'We are looking for leadership from BP and for shareholders to be put at the top of the list, not apologetically down,' Dobell said, pointing out that although BP's shares have started to lift a little, their climb has been from a 'derisory' base to around £4 each, versus £5.50 before the oil disaster struck, when BP was already enduring difficulties.
Leadership must improve
Dobell is not the first high-profile manager to criticise BP in recent months, with Artemis's Adrian Frost urging the company to to move forward and boost shareholder value.
But although Dobell said BP was making changes and selling assets the company should be better placed. He estimated it would take around five years for investors to see returns worthy of its history.
Dobell explained: 'I think BP has a lot of work to do. Cash flow is awesome, but [its] leadership is underwhelming. To me it's a classic recovery stock, and in five years BP will provide shareholders with returns that will justify all the sleepless nights they have given us.'
But he added: '[BP] has made a number of moves that are encouraging, but we are watching it closely. Unless the company gets its act together pretty quickly it's going to become lunch for somebody else in the industry.'
By Dobell's own admission, Dobell's M&G Recovery fund had a challenging 2011, when for the first time in a decade the star pick of Citywire Selection underperformed the FTSE All-Share.
Over three years to the end of March, however, the fund's performance remains strong with a 60.9% total return beating 52% from the FTSE All-Share index.
Weak links
According to a previous investor update, copper producer First Quantum Minerals (FQM.L) and sand minerals producer Kenmare Resources (JEV.L) were two of the biggest let-downs for Dobell in the second half of 2011 as they returned the gains they made in the first six months of the year. Both stocks remain key long-term holdings for Dobell, in keeping with his strategy of picking unloved stocks and holding these until they recover.
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2 comments so far. Why not have your say?
Franco
May 16, 2012 at 20:20
If Dobel considers BP a classic recovery stock or sure lunch for Exon, why has he only got 0.5% of his portfolio in it and why is he talking the stock up?
report thisMatthew Charles Flinders
May 17, 2012 at 11:38
He's held the stock for god knows how long. Why would you have a high conviction of a stock if you knew **** was about to hit the fan? Reduced holding currently but i gaurentee that will be around 5% by the end of the year. It is a decent stock, you dont really need to ramp up the confidence. I'm sure any value investor has this in their portfolio.
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