My BP lesson: leave stockpicking to the pros

As a junior investor, this is a useful lesson... Good luck making that money back.

In both climbing and falling markets, the so called proffessional fund managers fail miserably. 75% of them fail to beat the index. It's no better than doing what you did, blind gambling. Stock picking can be successful for individuals if you look further than the headlines when selecting stocks.

Dont feel bad, I picked all the banks for my pension, all the pundits said they are the safest shares. I wont tell you how much I have lost ,as I dont like crying..

I now realise the only tips you get are those the ones in the know want to sell

Llook at directors dealings for the honest guides.

Humm....I am not so sure! There's dozens of so called professionals who wish they had got out earlier and many who are still there!

I had a small holding but sold as soon as I heard of the disaster. I had visions of birds drenched in oil for months to come: the PR effect of that is a value killer; and, frankly, I think that BP will fall some more as too many income funds appear to be still in there: Surely they are bound to climb off this albatross rather than wait for it to fly again!

Stock Picking is the easy part.

Stock dumping is for the brave at heart

Total nonsense, I have been stockpicking for the last eight years and so far have out performed even the best of the top fund managers. In my lifetime ( now retired) every fund/ unit trust ,whatever I put money in had either a negative return or very low return.

The secret being to research in depth and watch your investment very closely.

The recent events at BP have been really pretty easy to read to do some short term trading in - my last effort giving me 8% in a day (in and out).

"After all, that is his job" - exactly! Fund Managers have almost unlimited amounts of some-one else's cash to take risks with. As long as they perform at about the average (with lots of mediocre fund managers the average is always going to be low) they have jobs for life.

The key of course is a diversified portfolio and a long time horizon. I like you have taken quite big paper losses on BP at the moment, but these have been more than offset by some gains on ARM and HSBC. I'm still ahead of the pack and have the satisfaction of knowing that I don't have to part with a regular commission to a fund manager, however badly they manage an investment

I too bought in to BP, thankfully it was around the lowest price and it wasn't a huge sum (more of a punt really). I believe that given a couple of years BP will recover from this scenario and hopefully I'll see a decent return.

My professional advisor bought into B.P. only two days before the sudden fall in price and he repeatedly reassures me that all is well !!!!

Best thing is trust your gut feeling to buy and sell

Well, I don't know a lot about investing, but I can recognise a falling knife when I see it (I caught one called Alliance and Leicester once ... NEVER AGAIN)! Rule1 of trading stocks and shares ... DON'T EVER, EVER, EVER TRY TO CATCH A FALLING KNIFE.

Pick an oil company that drills on land.

Actually Philip most fund managers will be less responsive than individual investors. They are mostly mandated to be fully invested at all times (not their fault), and for 'risk' purposes have to keep their tracking error low. i.e they will hold BP anyway as its such a larg part of the index.

Small investors such as us can enter and exit stocks intra day, with no liquidity concerns or fears about moving the market.

That said, market professionals do have the edge when it comes to company knowledge and also have superior analytical tools.

Agree with all that Mike Head and others say about professional Fund Managers. Been there, seen it and done it. Never again!

I, too have lost by buying BP in the middle of May, when the price seemed advantageous, but at least it was my mistake, I did not have to pay someone else to make the same mistake on my behalf!

As for Walewski's expertise, this seems to be more about a lack of honesty on the part of BP (5,000 barrels a day) and inside information (but we spoke to contacts who said it was more like 50,000 barrels a day).

And speaking about a lack of honesty on the part of BP do you remember the "BP quashes rumours" headline (about not paying the dividend) in this newsheet only a week past on Friday?

Of course if you follow the Anthony Bolton contrarian philosophy then this is the best time to buy.

ps my son worked for BP a couple of years ago at a production facility in the UK on land and was amazed at how strong the safety culture was, even down to insisting that you park your car the right way round so that you wouldn't have to reverse out. Anyone at the plant, no matter how junior, could declare a safety issue and it would be followed up immediately. There were signs up saying how many days from last incident etc. Everyone had safety briefings on joining etc.

I agree that is very useful lesson, that I hope I too have learnt

Like Philip Haddon I added to my BP holding and think I will hang on. worst case scenario would seem to be Chapter 11 for the US part of the business. Presumably the rest of BP's worldwide operations has substantial value. On his point about fund managers I agree and he has sensibly stuck to the good ones. Neil Woodford got out of oils into pharmas. I followed his advice but felt that BP's yield was too good to give up. Not any more!

A consistently good Investment Trust is RIT Capital Partners, Lord Rothschild's investment vehicle.

BP in top ten in FTSE , Do you have any idea how many Oil well they have?

Its true they have lost the value and reputation due to one disaster but it doesn't mean whole company in debt . I think It will take more time to get recovery . Just wait and watch for the Mexico ongoing disaster to be stopped. Here i would say we should look for long term investment from now and from next couple of months because company still exists and they got strong background.

Hopefully if any 'safety issue' not happen again to another Well.

Don't feel bad, I always joke that when I buy the price always falls and when I sell the price always rises, almost without exception. So I consider myself a pretty bad judge of timing.

What you have to do when investing in shares is take a very long term view. Selling at a loss is never easy so in most cases waiting is the game. If you can't wait and might need the money in the next 10 years don't get into shares.

As a rookie stockpicker, one method I could adopt is to follow what the most successful fund managers do, although of course I’m aware of what some of you have been saying about their records. If I wanted to do this, though, how would I find out what they’re doing very soon after they’ve done it? Weeks later wouldn’t be much good, obviously. Philip Haddon followed Walewski when buying BP, but failed to find out that Walewski sold shortly afterwards. If a financial journalist didn’t find this out, what chance would a rookie stockpicker have? Gilbert said ‘look at directors’ dealings for the honest guides’. Again, how to do this?

I think it was probably Mrs Thatcher who said "You can't beat the markets". And why are market professionals always happy when a BP opportunity comes along? Because the market profits makers - the exchanges, dealers and trading platforms that profit from deal activity. Each time an individual (or fund) trades a share - it profits the exchange and exchequer. And, each time we invest in funds, it profits the fund manger with an initial charge - shared with various commission earning intermediaries. If BP teaches us anything, it's the reality of risk amongst blue chips.

I was uneasy about BP's venture into tar sands on ethical grounds. The early news of the Gulf disaster confirmed my decision to sell and for once I got out well up-unlike my efforts with banks (they seem pretty unethical too!)

Why does ANYBODY use Fund Managers? Their track record is there to see.

All they are good at it taking money from suckers who are either too frightened or too lazy to inform themselves and get into the market on their own account.

I have also read about BP being accused of lying and of being incompetent. Is it not true that lying and cheating goes on daily in all walks of life, although perhaps business community is more prone to it.

However, a BP could not have grown into 'behemoth' [borrowing term from an article in Telegraph] merely through cheating and lying.

The fact of the matter is this incident has happened in deep sea drilling at possibly the deepest level below the sea surface.

We are also told that full facts are not known. Obama is said have some regrets about jumping the guns.

Total extent of the damange is gradually being discovered. Those who are rushing to blame BP without finding the facts for themselves may regret for making bad judgments later on.

A couple of months is a long time in fnd management and share movements. We'll find in couple of months the full extent of the liabilities, also that the whole Gulf will clear up much more quickly than we had thought. With certainty and rapid recovery, the share price will come back. Those xho bought at sub 400 will double their money ove rthe next couple of years maxi

I thought Stock Picking was selecting a share based on sound fundamental or technical analysis not simply following someone else's decision.

Try applying Slater's Zulu principle rather than being a sheep. You will have less to bleat about afterwards.

The lesson I learnt years ago, 'don't catch falling knives'. That rule always seems to be broken where Greed is concerned. It seems that this lesson will continue to be forgotten by private investors and some professionals.

Jeff of Sidcup has it seems bad experience with fund managers. Like businesses, fund managers tend to be either short term pickers or mainly long term. The funds have different functions within a broad portfolio. Trying to avoid unnecessary rambling, the main theme is that the portfolio should be dynamic and fully actively managed by professionals such as Asset Managers or wealth Advisers that have their own cost effective platforms. Gone are days where you hold the fund long enough never take the profits or equally not responding in timely manner to cut losses.

When you were buying at 5.50 I was advising our share club to sell at that price !!

Since early May many fund managers were buying in at 4.00 - 4.50. Not very clever are they ?

Nothing wrong with picking your own shares, but directly acting on someone elses advice, or reacting to the news is usually a bad idea. Much better to form your own reasons/opinions, whatever they are? Typically people are bullish on something one minute, then bearish the next, that's why you have to take your own stance and react accordingly. Also a stop loss, even if only in your mind is a must.

It is unlikely that BP has hit bottom yet and the recovery is likely very slow. I wouldn't feel comfortable stepping in and buying BP at this stage, there are still too many uncertainties? Valuing shares is currently very difficult, market sentiments seem to be a bigger factor these days. Certainly worth looking at the technical charts, but nothing is certain especially at this time. Things are looking quite bullish today, tomorrow, I wouldn't be so sure? It feels like we are back near the top again, will we see another sudden 1000 point dip on the DOW? Most unsettling! Beware the fall dear investors...

The thing about oil is they are not making any more and the more you use up, the more the rest is worth.. Yes this is a bad thing, but unless things go to the worst available scenario (all the oil in the world coming out of this hole), it will be fixed and the world will move on. I bought at the flotation 28 years ago or so. Selling will only perpetuate the life of the bear.

The only real surprise about the BP situation is that the institutions and the analysts who advise them didn't tell them to sell as soon as it became apparant that BP was lying about the size of the disaster.

I wrote on Citywire on 25th May, 'I may be wrong but on my return from Florida on 28th April I sold my entire holding of BP shares, a major part of my portfolio. It was clear at that time that the leakage of oil was far greater than BP had let on and local people involved in the oil industry take the view that BP is finished in the Gulf of Mexico. I was still making a profit on the shares and was not prepared to take the chance that BP would be able to maintain the dividend.'

Every major fund manager has BP shares in its portfolio because they

track they FTSE100 with probably 75% of their investments. Why, when disaster first struck, did they not go out to Florida (I happened to be there by chance) and talk to local oil men. Given that there are plenty of proxies for BP, why hang on? Why not sell as soon as the scale of the disaster became even vaguely apparant? Investment is not rocket science - largely just commonsense.

As a long time private investor, I can only empathise, as we have all been where you are now. Unfortunately, we [private investors] only tend to talk about our successes, not our' BP' type experiences. Vodaphone is a good example, which I purchased a long time ago and only now appears to be on the up. I was of the misguided view that 3G was the answer to the investors prayer. I have nursed my misjudgement for many years with reard to this judgement. perhaps I will see a profit in the not too distant future.

Don't dispair, you are not alone!

Pleased to report that I also make thew odd good decision.

I certainly do not share Philip's trust in professionals - I think GBShaw remarked the professions are a conspiracy against the ordinary person. Picking your own shares does have risks, but if you obey a few simple rules it is not difficult to consistently outperform professional funds, which I have done (modestly) for many years. The most important rule is to be cynical about all advice, especially from anyone who has interest in the market, but instead you should use your own common-sense judgement and knowledge. In BP's case it was obvious from the beginning that the situation was going to be much worse than admitted (you don't need any specialist knowledge to see it must be very difficult to estimate the rate of outflow without any equipment). The fact that BP can pay for all the conceivable claims (at present) is irrelevant. The near-certain long-term loss of reputation will result in irrecoverable damage, and even more so later if, as rumoured, bullying management proves BP to have been much more culpable than it will admit. Just like the guilty Lady Macbeth, BP "doth protest too much". My guess is the share price will not recover significantly until there is a prospect of BP being taken over and re-branded. On the other hand it might not. How long that will take to pan out is further guesswork, but such considerations have never stopped the professionals from kidding us they can predict the future.

My broker at Brewin Dolphin sold all my BP shares at 510p and I took a small loss while his Head Office recommendation still had a buy rating. Thankfully the regulators have not YET prevented individual client managers acting with some independence. Long may that last!

Good that you have been honest about your bad decision to buy and then hold BP.

PI's are often contrarian but don't give themselves a chance by creating their position in stages. E.g. now you are 33% down, how much capital do you have to invest to average down? My guess would be zero - even if you have the money available, I doubt you'd have the conviction to add to the position.

BP was a clear short from the start of the disaster. The upside was limited (10-15% big deal), the downside was huge.

Not only that but it took place in falling markets anyway. People buying in were not only betting on a bounce on BP but a bet that indices were not correcting.

So it was double-contrarian to be long BP.

generally speaking the news flow was going to be negative: even if the leak is stopped, the litigation is only just beginning. $67-$70bn is the current estimate.

Ex-tobacco class action lawyers (who recovered $300bn from the tobacco industry) are lining up to take chunks out the carcass.

The dividend is being pulled and not only that, a lot of technical analysts don't like the look of the oil price charts.

What is there to like?

Whatever happened to the stop-loss technique?

A well-disciplined investor sets a price and sells, no matter what the experts say. How else can you guarantee you'll still have a pot that can then be used either to buy back in, or to buy something else when the opportunity arises?

I think it takes a situation like BP. to make you wake up and smell the coffee. I did the same with BARC when it tanked March 2009. Luckily, I made the loss back as I never sold. It could have been Northen Rock though and I could have lost the lot! From this day I have always have my head rule my heart, setting strict stop losses and profit sell points. This was my Nirvana moment as I now always have a cash pile to take advantage of swings in the market and I don't get hit by large losses any more. I admire Philip's candid honesty and I am sure that he will trade with his head too in future! I would also admit that I sold my BP. holding at the end of the TAX year when I wanted to take up our annual ISA allowances. I was waiting to see if the SP would drop when the GOM disaster struck and stuck our allowances into RDSA instead.

As Warren Buffet says - "Be greedy when others are fearful, be fearful when others are greedy"

Surely everyone agrees that BP will recover at some point. I can't believe the number of people who panic when a price drops. Will you buy again when the price goes up? Nuts!

BP is still a quality share and I am buying at the moment because the price is low!!

Leave the stock picking to the pros? This gives the impression that they can some how add value? What fund managers don't want you to know is that they are no more sure of the future than you and I are. How can they be? Do they have a crystal ball?

All the evidence shows that the market is highly efficient, meaning that share prices reflect past and current information. News (which will affect the share price) is by definition uncertain meaning that there is know way to accurately predict future share movements. The irony is that their analysis makes the market so efficient, for that I thank them.

All the evidence shows that most fund managers underperform long term especially when taking into account costs and the minority that do is down to luck, probability and possibly taking on more risk. If this was not the case, then your talking about designing systematic trading rules to 'beat the market’. These simply don't exist and if they did they wouldn't be selling the idea of ‘beating the market’ to millions of investors, they would be lining their own pockets. They really are relying on the ill-informed.

The most efficient and prudent way to invest is by using these 3 steps. 1.Asset Allocation. 2. Trackers. 3. Rebalancing.

Anonymous 7 states more clearly than I did a few comments back concerning the truth about almost all fund managers. The same criticism applies to the majority of tipsters. If they were able truly to beat the market they simply would not hawk their tipsheets for such modest amounts of money. They would all be multi millionaires!

and the price continues down....

For the attention of Simon--10575 !!!!

Amazing !!!!!

My broker at brewin Dolphin not only held on to BP but added

some more buying new shares !!!!

It seems it is like a post code lottery !!!!

Lesson no.1 ..never never NEVER gamble more than you can EASILY afford to lose whilst being able to sleep at night (and buying shares is a gamble)..

Lesson no.2 Diversify , diversify , diversify . Include in your overall portfolio not only a wide range of shares but also gilts, PIBS, preference shares, corporate bonds and ordinary bonds with a range of maturity dates .