The fifth stock that I bought was British Petroleum. The stock had significantly decreased due to the accident, which was due to safety negligence, on Deepwater Horizon and therefore a lot of investors had decided to step out of the stock. In every sense the stock was therefore cheap and I expect that BP will become a stronger company that will look more closely on safety issues in future if not then I bought a very bad company indeed. It should also be added that I had missed one rule from Benjamin Graham which I have now re-discovered while reading the book for the second time. Never ever buy shares in a company where the litigation is still on going!
This means that I should never have bought this stock in the first place. It was a serious mistake by me and I hope that I will never make it again.
So lately BP has had problems on two fronts. US with the clean-up and in Russia due to their joint venture with the billionaires that blocked BPs further activities of getting access to more oilfields. The litigations in the US will soon have finished and the joint venture in Russia has been sold. Still BP lost out on the Russian oilfield deals (besides from now owning 20% of Rosneft) and will have a slightly bumpy road there due to this.
So BP had back in April 2012 at 5.55 € per share a P/E of 6.5 and a P/B of 0.9 which was to me very cheap. They also have a long tradition of paying dividends which unfortunately is in pounds sterling which is cheap today (in comparison to the euro) but one day I´m sure the sterling will become stronger and then the dividends will also improve. Either way the dividends are today 0.22 pennies per share or 0.25 € giving 4.5% that are paid out each quarter so still fully acceptable.
BP will be sold the day that their name will have improved, which will take a couple of years, with a P/E above 20 and the dividends down to around 1.25%.
No comments:
Post a Comment