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Dobell: BP will 'become lunch' for rivals

Dobell: BP will 'become lunch' for rivals

BP will ‘become lunch’ for rivals such as Shell and ExxonMobil if its leadership continues to underwhelm, Tom Dobell, M&G's Recovery fund star, has warned.

A-rated Dobell, who holds some 100 million BP shares in his £7.9 billion fund, said that for a company designed to deliver when oil was priced $60 a barrel, the petroleum giant should be doing much better, even taking into account its difficulties in the wake of the 2010 Gulf of Mexico oil spill.

In particular, Dobell (pictured) said he feels disheartened by BP's chair Carl-Henric Svanberg, 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 and 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' Adrian Frost urging the company toshrink to move forward and boost shareholder value.  But Dobell said that BP is already in the process of disposing assets and even putting aside the legal troubles it has faced since Macondo, the manager said the company should be better placed, estimating it will 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 [it's] leadership 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 Citywire Selection vehicle underperformed the FTSE All-Share.

Over three years, however, the manager's returns remain impressive.  To the end of March Dobell has delivered 60.9%, compared to 52% by its All-Share benchmark.

Weak links

According to a previous investor update, copper producer First Quantum Minerals and sand minerals producer Kenmare Resources 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.

'Even after the recent decline, First Quantum Minerals is valued at more than £5 billion and Kenmare Resources remains a constituent of the mid-cap FTSE 250 Index, having been promoted to a full listing in September 2010, Dobell explained at the time.

'We have confidence in the management teams and stand firm by our view that the long-term opportunity remains exceptional.'

Car dealer Inchcape and technology firm Invensys were other drags on performance.

Consumers offer hope

Increasingly, Dobell said that he and his team examining stocks for his recovery fund are increasingly noticing opportunity in the consumer space.  While they do not believe they desperately have to be invested in the sector, buying into the right companies at the correct time may deliver lucrative returns.

Some of the names Dobell has looked at recently include Homeserve, cash and carry chain Booker and low cost airline Easyjet.

'A number in that area are interesting but it is not necessarily an area we have said we absolutely have to go after,' the Recovery team said.

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Tom Dobell
Tom Dobell
153/155 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 11.48%
Adrian Frost
Adrian Frost
37/73 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 42.60%
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