Mr. Mega, excellent discussion everyone. I am long BP and plan to add some shares into my Roth. I'm holding on to see if the S&P holds 1250. According to some the market could be in for a big correction if we break that support level.
I will try starting with below:
Valuation: BP has had a good run since the depths of the Gulf oil spill crisis but still has not recovered its valuation prior to that event despite oil prices that have risen significantly over the last year. British Petroleum sells at 7 times 2011 and 2012's consensus earning and yields almost 4%. It sells at the low end of its five year range of valuation based on P/E, P/S, and P/CF.
Prognosis: British Petroleum's stock has justifiably been beat up by the aftermath of Gulf oil spill and its challenges in Russia. However, given its current valuation I believe it is undervalued and has several things working in its favor.
The long term floor for oil prices seems to be permanently lifted over the last few years. Given the long term growth in demand from emerging markets and the current turmoil in the Middle East; I do not see this changing any time soon and the potential for further increases seems high. I don't believe this is currently reflected in the stock.
Although the dividend yield is almost 4%, it has the potential to go higher over the medium and long term. BP cut its dividend in half in response to the liabilities created by the spill. As the company addresses those liabilities, the potential to start to restore their previous payout ratio should increase.
The company has made some core strategic decisions to focus on its core competencies. BP is selling its Texas refineries which should allow it to focus even more effectively on production and exploration.
The damage from the Gulf Oil Crisis is much less than was originally expected. Tourism and fishing has returned to normal much faster than anyone projected. This should speed up how fast BP can settle claims and put this disaster behind it.
BP has the second lowest production costs of the oil majors, is diversified across 29 energy producing countries, and has exciting opportunities including the Arctic region and Iraq. Rising gas prices and a changing political environment should also eventually speed up the permitting process in U.S. offshore assets
BP has the lowest with a Price To Forward Sales of 0.36x of the Majors. Given BP's valuation, improving prospects and high oil prices; BP should be selling at a higher multiple. Even a very conservative multiple of 8.5 to 9 gives you a more reasonable price of the mid 50's. This is an improvement from the $44 range BP currently sells at.
The trading of this stock is further complicated because it is priced in pounds offering a coversion of 6 ADR's. Bp Plc medium-term technicals remain negative. The short term, however, shows increasing bullish strength as the security tests first resistance in the 467.4 pound area, while support is estimated at 452.8. The technicals favour a new upswing with a likely target of 482 (green line in the chart).
The security's level of risk is currently under control, with daily volatility at 2.536, while daily volume remains high, having risen above the 1-month volume moving average in the last session. Bp Plc $0.25's stable movement suggests that institutional investors have an interest in the security, to the extent that they can exert a high degree of control over its trend, which appears orderly and without strong fluctuations.
Buy under 44 and sell at 46 until September. A rise of interest rates in London or slowing of the US will change the rules.
IMO there is no chance of a buyout so sell on that hype.
PS - I have 2 favorite morons you should ignore on this board - its not hard to tell who they are.
Nice. But with almost a 4% divy and the possibility of it going substantially higher why sell at 46?
Aren't you afraid you will miss the big run one of these days?
COP traded like crap after WEB dumped a bunck of shares and then one day it just took off after trading in a range for six months to a year.
BP is the old COP. COP was the cheap one and now its BP.
Since the moratorium was lifted 15 new deep water drilling permits have been issued. Why hasn't BP gotten even one? Didn't ask for one ? Has BP been denied ? What are the facts ? Historically BP wa the big operator in the GOM !