BP Stock – Oil Spill

Despite a colossal oil spill that has the world glued to their televisions, British Petroleum stock looks like an excellent buy at this price. Now down 33% from its recent peak, more than twice the decline of Exxon Mobil during the same time, I’d be a net buyer on BP’s devalued stock.

The World Will Forget

Sure, BP might be forced to pay a settlement to all the fishermen, tourism businesses, the regulators etc. And I’d venture to guess that it won’t be cheap. However, this company earned more than $20 billion dollars last year with the average oil price roughly the same as today. This year, it will be just as profitable minus the lawsuits. So, even if it gives up a full year of income, you’re still buying this stock at a price to earnings of SIX!

Check Out That Yield on BP Stock

Again, even if BP has to give up a full year’s income and slash its dividend, 2011 earnings will look amazing. Currently, the stock yields a hefty 8% dividend, which some say will be slashed temporarily to cover litigation costs. So what, it is only temporary, and I’m in for the long haul. This company could easily come back with a similarly high dividend and offer some extreme potential for upside. And please, if you think $67 oil is here to stay you’re out of your mind.

Look at the Options!

People in the option market are running scared at BP stock. Take a look at the January 2012 option prices, most notably for deeply in the money calls. You’ll find that BP isn’t even trading to a premium two years out, and even at the $30 strike you can get a hold of some options for a $2 premium over the current share price. That is nothing! Nothing! Want more protection? Buy the $40 calls at $8.20, the most you can lose is $8.20, the most you have to gain is unlimited. This stock won’t be down for much longer. In fact, I fully expect super contrarian Warren Buffet to hop on board shortly. This stock is it!

Update BP Stock Dividend Suspension June 16

BP has announced it will set up both a recovery fund of $20 billion, a $100 million fund to pay oil workers laid off due to the blast, and suspend its quarterly dividend.

15 thoughts on “BP Stock – Oil Spill

  1. I’d think most of the lawsuits will take some time to settle, but losing their share of the American market will put at least a little dent in them. And we want them OUT. They are felons in the 1st degree and have demonstrated a pattern of criminal behavior. Doing business with us is simply not an option any longer. By the time this is finished most of the Gulf is going to be a dead zone. As property values plummet along the coastline, as jobs are lost and business’s close, as the domino effect of a loss of tourism sweeps round the coast of Florida….many of these folks aren’t the dirt poor 9th ward folks of Louisiana. You’re talking about pricey real estate totally devastated. The oil won’t just ‘go away’.

  2. I hope you invest heavily in BP and lose it all for suggesting people attempt to profit off the killing of the GoM, as well as the economic livelihood of its people.

  3. The way to seal of the pipe from leakage would take using a electric magnum and it shall be inserted like with a magnectic force to seal off the hole where the oil leak is coming from within the pipe of the Gulf where it is spreading currently.

  4. Really? No really? Am I really on an investing website? This is an embarrassment, disgrace, and one of the worse advice articles on investing I have ever read. You should be ashamed of itself for posting such nonsense. Best part is this article is a top return on google for bp stock, which ultimately means that your advice will fall faster than the stock.

  5. Agree completely, with one caveat. Not sure what the lingering damage to public opinion/goodwill will mean to BP’s value. Consensus on worst case scenario liability seems to be about 70 Billion. Not sure what the goodwill hit will mean, but some sort of rebranding can probably stem the tide there (e.g. people kept buying Exxon gas in the wake of Valdez). I don’t think it’s a guaranteed win, but I don’t think there’s anything to lose. A lot of upside.

  6. So buy or not buy? I just want to make money and I am a novice in the stock market. Seems to me that if the stock is low and BP will survive and prosper then the stock is a good buy.

  7. hahaha if you think that BP will not rebound you are an idiot, they are a well established corporation with more than enough money to cover what greedy politicians will soon extort from them

  8. The fact that anyone would invest in this company shows an absolute lack of morals, ethics and heart. Unfathomable environmental damage to not only the Gulf Coast but many of the coasts in the US and world will be damaged forever because of this.

    Reinvesting in this stock is simply supporting this company and their decisions.

    The good old American dollar, fueled by greed still rules in the US, its a real pity to see.

    At this rate it doesn’t matter which administration you hire, your own people will kill themselves off long before any corporation or administration will do it.

  9. Well experts let’s see. If you bought the stock when this article was written you would have paid $42.41 per share. Not to mention the free fall had already started and was down from $60 a share when the spill began, but let’s just assume people were to listen to this nonsense article and month later when you published this article people paid the $42.41 and bought what “chuck” calls an “established corporation with more than enough money”. Those people would be crying today at a price of $26 per share. Keep thinking greed people, there is abosultely no upside to this stock for a very very long time.

  10. I recommended that people play prudent with options as a way to get downside protection with all the upside.

    BP is a strong firm with impressive cashflow, excellent profits, and will emerge just fine. As we saw with Exxon Valdez, projected losses generally boil down to very small actual losses.

    Of course, there is plenty of risk in BP, and I think everyone knows that. But there is also a lot of risk already priced in, and not a single bit of upside. Once the well is capped, I expect an immediate surge in price. Following firm loss expectations, I expect another immediate increase in price.

  11. I purchased BP stock at 27.00. It is now at 37.00. I will continue to watch this stock increase and laugh all the way to the bank. You guys keep sitting around with your high almighty selves and you will be sorry. I too, am not happy about what happened with the spill and those families it affected, however, my mom raised 2 fools and I was not one of them. BUY, BUY, BUY People. Hahaha…..

  12. I haven’t done any research on BP as an investment, but I don’t think I would consider it with all that has happened. The possible risk outweighs the possible gain. Great job on catching the bottom numberoneg. I do think Transocean has a lot of upside, though.

Comments are closed.